The amount of inheritance tax paid by taxpayers soared by 19% to more than £6bn for the first time ever, according to UHY Hacker Young, with the amount increasing from £5.04bn to £6.01bn in the last 12 months alone.
It comes as the impact of the pandemic and “record high” property prices have seen a “larger than usual” number of estates become liable for the tax over the period.
In addition, the government reportedly failed to increase the tax-free allowance on inheritance in line with inflation. The rate has instead been frozen at £325,000 since April 2009. If the inheritance tax allowance had risen in line with prices, the threshold would be £439,000 today.
Looking ahead, UHY said that “even more” estates are likely to be hit by IHT as the government plans to keep the level at which people start paying the tax frozen until at least 2026.
It also suggested the treasury could increase IHT rates in upcoming budgets as the government looks to reduce borrowing following the pandemic.
Mark Giddens, partner at UHY Hacker Young said: “Inheritance Tax is becoming ever-more lucrative for HMRC, as the latest figures show.”
“A tax that was original supposed to affect only the super-rich is increasingly hitting middle England. As a result, families increasingly understand the importance of tax planning to ensure they can pass the fruits of their labour to their children. The pandemic has led to record peacetime borrowing, and the Treasury will be looking to balance the books any way it can.”