The latest figures from HM Revenue and Customs (HMRC) show that inheritance tax (IHT) receipts increased to £3.2bn in the five months from April 2023 to August 2023.
This marked a £300m increase from the same period in the previous year, and continued the upwards trend over the past decade.
One in every 25 estates pay inheritance tax, but the freeze on IHT thresholds, decades of house price increases and high inflation have brought more estates above the threshold.
Wealth Club suggested that the average bill could increase to just over £234,000 this 2023/24 tax year, an 11% increase from the £214,000 average paid just three years ago.
The tax is typically paid at a rate of 40% over certain thresholds.
The main threshold is the nil-rate band and applies to the majority of people in the UK, enabling up to £325,000 of an estate to be passed on without having to pay any IHT. That has been unchanged since 2009.
However, there is also a Residence Nil Rate band worth £175,000 which allows most people to pass on a family home more tax efficiently to direct descendants, although this tapers for estates over £2m and is not available at all for estates over £2.35m
Nicholas Hyett, investment manager at Wealth Club said: “The Treasury raked in an extra £300m from inheritance tax from April to August 2023, compared to the same period a year earlier.
“This increase is being fuelled by years of soaring house prices and frozen allowances.
“While just 4% of estates pay inheritance tax at the moment, given the nil-rate and residence nil-rate bands have been frozen for years people with more regular incomes and average value homes will end up getting caught out by this most hated of taxes.
“Moreover, with the Government’s wallet under pressure from all angles, there’s unlikely to be any respite soon.”
He concluded: “The good news is that there are still lots of legitimate ways to pass on money free of inheritance tax, which is why inheritance tax is referred to as a ‘voluntary tax’ in some circles.”
