Record of £3.5billion taken off grieving families in tax this year

Inheritance Tax (IHT) receipts for the first half of the 2022-2023 financial year overtakes the previous high of £3.1billion in the same period last year, according to latest figures.

More families are being hit by the levy, as soaring property prices push homes into higher tax thresholds frozen since 2009.

And more people are set to fall into the death duty trap as the nil-band rate threshold of £325,000 – the size of the estate not subject to IHT – will stay the same until 2026.

Everything above £325,000 is liable to be taxed at 40 percent.

And the likelihood of a higher limit is “vanishingly small” as the Treasury scrambles plug a black hole in the UK’s Budget, experts warn.

Alex Davies, of broker Wealth Club, said: “We can’t see that there is any chance that this money-spinner will be reduced or abolished any time soon.”

Stephen Lowe, of retirement specialist Just Group, said: “Frozen thresholds and soaring property prices that added £1billion of housing wealth every day to the estates of we, retire alist  states homeowners over 55 since the start of the pandemic have combined to tip more estates into paying IHT.”

Since the threshold was frozen, the average house price has almost doubled from just over £150,000 to almost £300,000, according to the UK

Shaun Moore, of wealth manager Quilter, said: “IHT was once viewed as a tax on wealthier individuals, but the reality is that more people are now getting caught in the net.”

House price growth is not confined to wealthier areas such as London and the South-east.

Significant rises in the East and South-west regions have driven average prices above £300,000.

In addition to the £325,000 IHT threshold, there is an extra £175,000 nil-rate band when passing down a primary residence to children or grandchildren.

As surviving spouses can inherit a partner’s allowance, a couple can usually pass on £1million free of IHT.

Julia Peake, of pension company Canada Life, said: “You can potentially pass on your pension in a tax-efficient way, so take this into account when deciding which assets you use to provide an income in later life.”

Most people can save up to £40,000 a year into a pension.

On death, they are free of IHT and those inheriting them are charged their usual income tax rate when they draw on it.

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