HMRC collected a record sum of £5.4 billion in inheritance tax (IHT) during the 2018/19 tax year, according to figures released by the tax authority.
The increase comes on the back of a 15% rise in the number of estates liable for IHT. Between 2015/16 and 2016/17, the number of estates paying IHT rose by 3,600 to 28,100.
Rising asset values, particularly in regard to properties in London and the South East of England, have been a key factor behind the increased number of estates falling into the IHT net. The freezing of the tax-free nil-rate band threshold also played a key role.
The residence nil-rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants, such as children or grandchildren. The amount of relief is £150,000 for 2019/20, rising to £175,000 for 2020/21.
Despite the increase in estates paying IHT, the tax only applies to 4.6% of deaths in the UK. The average amount of tax paid in 2018/19 was £179,000.
The figures also revealed that only 3% of estates falling into the scope of IHT in 2016/17 were valued at £1 million or more, and they accounted for 72%, or £3.4 billion, of the total IHT take of £5.1 billion.
In July, the Office of Tax Simplification (OTS) proposed several changes to IHT, although it did not make any recommendations in regard to the RNRB.