An analysis of data from HM Revenue and Customs reveals that inheritance tax paid by UK families has topped £5 billion a year for the first time in history.
The reason, says legal firm Miller Hendry, is that IHT - once considered a burden only for the very wealthy - is now commonly paid by middle class families as a result of high house prices and stamp duty discouraging elderly people from downsizing.
According to HMRC data the amount of IHT paid by UK families has risen almost 70 per cent between 2012 and today.
The figures show that in 2011/12, HMRC collected £2.9 billion and this increased to £4.8 billion for the 2016/17 tax year. The statistics also show a sharp peak in IHT receipts at the beginning of this tax year, with an increase compared to the same period last year of 34 per cent.
Record numbers of estates, particularly in the south of England, are paying IHT as a result of increasing house prices and the freezing of the IHT nil-rate band at £325,000 since 2009.
Separate projections produced by the Office for Budget Responsibility (OBR) also show that the number of estates on which IHT has been paid has more than quadrupled since 2010, from around 10,000 to well over 40,000.
Many estates will also have narrowly missed out a new, additional tax-free allowance for those owning a home which became available from April 2017. This is called the ‘residential nil-rate band’ and will eventually be worth an additional £175,000 per person.
Added to the £325,000 allowance that everyone gets, this means a new allowance for people who own their own property of £500,000 by 2020/21. In the case of spouses or civil partners, two allowances are commonly available giving a total allowance of £1,000,000.
This additional allowance will be introduced gradually over four years, with the allowance worth £100,000 in 2017-18; £125,000 in 2018-19; £150,000 in 2019-20; and then £175,000 in 2020-21.
“What we have seen over the last five years is more and more estates being pulled into paying IHT due to increasing house prices, a recovery in the financial markets and the IHT nil-rate band remaining static at £325,000” says Caroline Fraser, a partner with Miller Hendry.