The Chancellor is planning to increase the amount of money the Treasury raises from inheritance tax (IHT) in its upcoming Budget, according to reports.

The Government is considering multiple changes to the tax, including exemptions and reliefs, according to the BBC.

IHT is currently charged at 40% on assets over the £325,000 threshold held by those who die.

In 2021/22 Britons paid a record £5.99bn in IHT, a rise of £0.23bn in a year, according to the latest figures from HMRC. There were 27,800 taxpaying estates, a rise of 800 year-on-year.

According to the taxman, 4.39% of deaths led to an inheritance tax bill last year, up by 0.66% since 2020/21 and the highest proportion since 2016/17.

According to Hargreaves Lansdown, 1 in 20 people say losing inheritance tax exemptions is their biggest tax fear in the Budget. This rises to one in 10 among retired people.

Rachael Griffin, tax and Financial Planning expert at Quilter, said she would not be surprised if the Government were to make IHT changes in the Budget.

She said: “In reality, IHT has been ripe for reform and simplification for years, as it is full of impenetrable and irrelevant details that need to be reviewed.

“We must hope that any reforms from Labour will tackle these issues rather than simply opting for a quick tax grab by lowering the £325,000 nil rate band. The Conservative Party, under Rishi Sunak, flirted with the idea of reducing, if not abolishing, IHT to woo voters. If Labour’s reforms are perceived as a hasty tax grab, they are likely to receive significant backlash. Policymakers should tackle IHT reform seriously instead of using it as a political tool and revenue generator.”

Ms Griffin said changes she will look out for include the closure of several tax reliefs such as agricultural and business property relief with a view to potentially removing, capping, or redefining these benefits, which could have the knock-on effect of AIM share losing their inheritance tax break.

She also said if the Government chooses to simplify IHT, they may also make changes to gifting laws.

She said: “If reports are true and Labour opts to make IHT more punitive, it could choose to balance this by modernising gifting laws. Simplifying the IHT regime and increasing the annual gifting exemption could ease the complexity of transferring assets and help families pass wealth on during their lifetime. Raising the gifting threshold would encourage earlier wealth transfer, reducing future IHT liabilities, and potentially boosting consumer spending."

The Chancellor will present the Budget to Parliament on 30 October.