4,000 households have been dragged into paying inheritance tax (Image: Getty)

Tories ramped up the stress for the hated inheritance tax to be ditched final night time after the variety of households hit by it has soared.

An additional 4,000 households have been dragged into paying the loss of life responsibility in a yr, a 17 % improve. Average payments have been an “eye watering” £214,000 on the estates of family members.

Former Cabinet Minister Sir Jacob Rees-Mogg accused the Taxman of “grave robbing” by snatching away massive chunks of inheritance from extra households.

He stated: “Fiscal Drag may sound like a modern-day Burke and Hare because as those evil body snatchers sold your mortal remains, so fiscal drag is stripping your heirs of their inheritance.

“Inflation is eating away at the tax-free death duties allowance so that more families see their parents' graves effectively robbed by the Revenue. This unfair tax is a punishment on capital which deserves capital punishment.

READ MORE Inheritance tax set to soar even higher than 'eye-watering' £214K average bill

Rishi Sunak is expected to look at changing IHT (Image: Getty)

Prime Minister Rishi Sunak is expected to look at changing the unpopular tax ahead of the next general election.

Discussions have been held in No 10 about the possibility of changes being made ready for the election or in the next manifesto but nothing is expected to be done before the autumn statement or budget, government sources said.

Low-tax Tories believe it would be a “gamechanger” on the basic election. Taxes kick in on estates value greater than £325,000, which impacts increasingly more individuals as home costs rise.

The 40 % tax is imposed on all the pieces above the brink. But estates of spouses and civil companions value up £1 million might be handed on with none inheritance tax legal responsibility.

Abolishing inheritance tax might price the Treasury a possible £7 billion a yr. Polling reveals many of the public need the brink to be raised to take extra individuals out of paying it.

Reforming the tax is more likely to be extremely popular within the southeast seats the place the Tories are dealing with a battle from the Liberal Democrats.

Official figures confirmed 27,000 of all UK deaths, some 722,000, resulted in an inheritance tax In 2020/21. The common legal responsibility per property fell barely by £2,000 to £214,000, in keeping with HMRC.

Just underneath 4 % of estates paid the tax, broadly in step with the earlier yr.But the figures confirmed a spike within the variety of tax-free transfers amongst spouses of 21 %, which specialists warned would retailer up potential liabilities for the long run.

The variety of households paying the tax for the reason that 2009/10 monetary years has nearly doubled from 15,000 households to 27,000. Economists stated hovering home costs in the course of the pandemic was largely behind the rise in households caught by the responsibility.

Nicholas Hyett, Investment Manager at Wealth Club, stated: “A lot of the increase is probably down to the spike in house prices we saw during the pandemic, paired with the freeze in inheritance tax bands all the way back in 2009.

The number of families paying IHT has doubled (Image: Getty)

“This ‘fiscal drag’ is a sneaky attempt by the government to grab more cash without taxpayers noticing.

“The result is that families whose houses and assets wouldn’t have qualified for IHT just a couple of years ago, are now finding themselves dragged into this most hated of taxes despite no change in their underlying wealth.

“They live in the same house, and enjoy the same standard of living – but now they fall victim to a tax that was originally targeted only at the very wealthy.

“Unfortunately that’s a trend that’s set to continue. So long as inheritance tax thresholds remain frozen, the number of families paying inheritance tax is only likely to grow.”

Myron Jobson, a senior private finance analyst at Interactive Investor, stated: “Growth in house prices, investments and savings means that even relatively modest estates crossed the IHT threshold.”

People name for the tax to be ended (Image: Getty)

Helen Morrissey, head of retirement evaluation at Hargreaves Lansdown, stated a “heady mixture” of hovering home costs and the choice to freeze various tax reliefs was behind the rising numbers of households caught by the tax.

She added: “Reliefs such as business property relief have proved popular as have donations to registered charities but for those families whose wealth is largely tied up in their family home for instance, they may feel they have few options.

“The housing market may not be as buoyant as it once was but it’s fair to say many families will continue to face alarmingly high bills that they may not have prepared for.”

A Treasury spokesman stated: “We want to support hard-working families who want to pass on an inheritance.

“The government’s generous reliefs and allowances ensure that 93 per cent of estates do not pay inheritance tax, and 2015’s pension freedom reforms mean that people can now choose how to access their hard-earned savings.”

Ranil Jayawardena, chairman of the Conservative Growth Group and a former Cabinet minister stated: “Inheritance tax was only meant to be paid by the wealthiest, but these figures show so many hardworking families are trapped today.

“As a starting point, the threshold could be raised to £1 million, so that people are able to downsize and help the next generation without fear that they’ll be clobbered by the taxman when they die.

“But that’s the heart of the problem. It’s a death tax. It’s double tax. It’s got to go.”

Comment by Helen Morrissey - Head of retirement evaluation at Hargreaves Lansdown

Inheritance tax might solely be paid by a comparatively small variety of individuals however there are few taxes extra hated by the general public at massive. A survey we did again in 2021 confirmed 24 per cent of individuals named IHT as their most hated tax -way greater than revenue tax which was solely named by 17 % of individuals.

Many persons are against the taxman benefitting from a legacy they would like to go to family members. There have even been rumours the federal government is mulling whether or not to abolish it forward of the following election.

Though nonetheless a comparatively small proportion of the full UK tax take there’s no denying receipts have risen quickly lately. 

In 2020-21 greater than £5.7 bn was paid in IHT with the typical invoice an eye-watering £214,000 invoice. 

At the time the rise in receipts was put all the way down to the horrible toll of the pandemic however because it loosened its grip IHT receipts continued to surge – in 2021-22 they hit £6.1 bn. 

Provisional figures for 2022-23 present they've risen additional and can prime £7 bn.

A combination of rising asset values and frozen reliefs are a significant factor behind these rises. Soaring home costs have pushed many individuals’s estates nicely over inheritance tax limits.

Transferable nil fee bands between spouses and the residential nil fee band have been vastly helpful however the authorities’s resolution to freeze these reliefs imply they've didn't maintain tempo with rising asset values. This leaves increasingly more individuals uncovered to doubtlessly huge payments that many is not going to have anticipated or deliberate for.

Wealthier persons are extra seemingly to have the ability to deploy IHT mitigation methods resembling gifting to charity or giving cash to family members whereas they're nonetheless alive however these individuals whose wealth is essentially tied up of their residence for example, might really feel they've few choices obtainable to them to cope with this tax.