The UK Government will collect £37bn in inheritance tax over the next five years according to the latest predictions from the Office for Budget Responsibility (OBR).

UK families paid £27bn in inheritance tax in the last few years to the rise represents a 36% increase.

The OBR increased its five-year IHT forecast by £2.5bn in its Economic and Fiscal Outlook report due to rising house prices and recent inflation.

Five years ago IHT raised an annual £4.8bn but the OBR predicts it will reach £8.3bn by 2026/7.

The OBR has also raised its IHT forecast for the 2022/3 tax year by £300m.

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Rocketing house prices and inflationary increases on the value of other assets means the amount of inheritance tax paid by UK families over the next five years is expected to be almost £10bn higher than the previous five.

“The Chancellor’s decision to freeze the tax-free allowances for inheritance tax until 2026 means more families will be caught in the inheritance tax net in the coming years.”

The OBR added that its projected rise in IHT receipts is partially driven by the most recent ONS population projections which assume more deaths than were in the projections for the OBR’s October 2021 predictions.

The OBR did however say that its IHT predictions were “sensitive to our assumptions about asset prices which have been volatile since Russia’s invasion of Ukraine” which it said adds to the “uncertainty” around its forecasts.