In the past decade, the estate tax (IHT) of HM income and total customs income has more than doubled, from £3.8 billion in 2014/15 to £8.25 billion in past tax years.
HMRC data released today also showed that the number of deaths triggering the IHT bill has increased by 13% to 4.62% over the past year.
Pension and investment provider AJ Bell said the ongoing freeze of Neal Rate Band means more and more families are caught by taxes.
Everyone can pass to £325,000 before any IHT expires, although the IHT zero-rate band has been frozen since 2009.
Residence Zero Rate Bands (RNRBs) have been available since 2017, with up to £175,000 per person per person if the property is left to its immediate offspring.
The combination of these bands means that most couples can pass up to £1 million on their second death.
But if both bands are rising by inflation rather than being frozen in 2020, a couple can currently pass a £1,448,000 estate, totaling.
“Despite the introduction of new relief, the zero-tax band (RNRB) that resides in 2017 has been phased out – the government has collected more tax rates in the death tax than ever before, and the tax rate has more than doubled in a decade,” said Charlene Young, senior pension and savings expert at AJ Bell.
“Now, the proportion of estates that pay IHT is now back to the same level as before the RNRB was introduced, but instead of offsetting the principal by adding new exemptions or adding existing legacy, the principal is set to cut exemptions.”
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Starting from April 2026, wealth that completely avoids IHT will begin to be included in the estates of people who are IHT.
Young added: “In the double blow of many estates – the principal also continued to continue the major freeze on the NIL Rate Band and Residence Nil Rate Band until at least 2030.
“While IHT reforms may undermine plans for families who hope to pass future wealth, the impact of the two decade-long freeze on two major family allowances has shown their teeth and more legacy than ever before.
“In 2022-23, that number jumped to 31,500, an increase of 13% in the year.”
