A survey commissioned by Octopus Investments showed nearly nine out of ten people were in the dark on the inheritance tax threshold – with only 14% of being able to give the right answer of £325,000. This increased slightly to 18% for over 70s.

The research findings come as the government forecasts that the tax take from IHT receipts will increase from £3.8 billion last year to £5.6 billion in 2020-2021. This was despite the phasing in of the new IHT free allowance of £175,000 per person, introduced by the government in last year’s Summer Budget, which can be used against the family home.

Nearly 1 in 3 homeowners (29%) over 70 have not thought about IHT planning and only 8% of people were aware that ISA savings are subject to a 40% IHT charge on death, the poll suggested.

A summary read: “Research published today by Octopus Investments revealed that there is a fundamental lack of awareness and understanding around inheritance tax.

“The study, conducted by Opinium, highlights that people could be sleepwalking into leaving an IHT bill for their loved ones by not understanding the charge, and failing to realise that tax efficient savings in life are not free of IHT on death.”

The majority of ISA holders in the UK are over 65, with more than 6 million people in this age group.

Yet, the data revealed that only 6% of people over 60 plus were aware that ISAs are subject to a 40% inheritance tax charge upon death.

Simon Rogerson, chief executive of Octopus Investments, said: “Getting financial advice can make a real difference to people’s lives. Our latest research shows just how vital it is to be aware of the key rules and regulations around tax planning so you can make your money work harder for you and help look after those you love when you are gone.

“ISAs remain the “go to” financial product for many people as they look to build up a nest egg in a tax efficient way during their lifetime. But with such a large number of older people investing into them, there is a worrying lack of awareness that ISAs are subject to a 40% inheritance tax charge.

“ISAs are a great tax efficient investment in your lifetime but more people need to be thinking about how to pass on their hard earned money to their loved ones when they die.”