Financial Planners have warned that better planning is needed to help thousands avoid steadily rising Inheritance Tax bills as more estates are caught by the death tax.

Latest government figures show that receipts for the period April 2021 to November 2021 were £4.1bn, £600m higher than in the same period a year earlier.

IHT receipts for the government 10 years ago were below £4bn annually but have risen steadily since to top £5bn each year, a +20% rise.

Provisional HMRC stats suggest that higher volumes of wealth transfers took place during the Covid-19 pandemic.

Planners say clients need to take IHT more seriously with signs that more is being taken by the government from a relatively static pool of estates.

Higher property prices and more accumulated wealth means the size of estates is growing in many cases.

London and the South East, where property prices are highest, are particularly hit by rising IHT costs.

Shaun Moore, tax and financial planning expert at Quilter: “The higher tax take is a continued demonstration of the Chancellor’s fiscal drag, which is slowly increasing government tax revenues without seeming to be too much of a burden on taxpayers. With property prices continuing to rise, even though the stamp duty holiday is a distant memory, IHT payer’s bills will rise in future with the ongoing house price inflation.  

“Unsurprisingly, it is London and the South East that dominates the payment of IHT, and given the disparity in house prices in these regions, they will be most at risk from the IHT freeze: 

Source: HMRC IHT Statistics for 2018/19 

To avoid IHT problems, he urged more use of the nil-rate band and residence nil rate band as well as making gifts to family members and considering Potentially Exempt Transfers (PETs) or Chargeable Lifetime Transfers (CLTs).

He added: “As well as reducing the taxable estate value, gifting is particularly useful for estates (above £2million) impacted by the RNRB taper as the gifts can immediately reclaim the extra band.”

Luke Worthy, Chartered Financial Planner at Kingswood, said the Chancellor appeared to be targeting increased IHT revenue.

He said: “With hundreds of billions of pounds added to the UK’s debt over the pandemic, the chancellor will be looking at preserving and increasing every revenue stream possible. In addition, more people are finding themselves caught by IHT due to the significant rise in property prices over the last two years. 

“The increase in IHT receipts is therefore largely unsurprising – over the coming years more and more people will find themselves subject to a tax they might have thought only applied to the very wealthy. Early estate planning is key.”