People in the UK paid just under £5.5m in inheritance tax (IHT) last year, according to latest figures from HM Revenue & Customs (HMRC).
The total was a 3% increase on the previous tax year. The amount HMRC has raised through IHT has more than doubled in the past nine years, according to provider AJ Bell.
It said IHT bills had been rising steadily since 2009/10 mainly as a result of the government decision to freeze the nil-rate band at £325,000.
Senior analyst Tom Selby said: “With the nil-rate band frozen at £325,000 for a decade, it is no surprise that HMRC continues to rake in record sums through IHT.
“The world of inheritance tax is painfully difficult to navigate and while the wealthiest should be able to afford suitable advice to take advantage of the various exemptions and reliefs available, those who can’t risk being caught out.
“As a minimum, the level of the nil-rate band should be looked at again and increased in line with inflation. Ideally, a more fundamental government overhaul of the IHT framework should also be undertaken, aimed at simplifying the structures for investors.”
Selby pointed out that savers can mitigate the “tax grab” by saving through a pension scheme.
Under changes introduced in 2015 alongside the pension freedoms, untouched defined contribution pensions can be passed on tax-free to beneficiaries if a client dies before age 75. If a client dies after 75 the money will be taxed in the same way as income when it is withdrawn.
“One area the government should act on is a quirk in the rules which means most providers are required to exercise discretion over how pension death benefits are paid out in order to prevent an IHT charge being levied. This seems odd in a world where retirement control has been firmly put in the hands of the individual.
“The current approach can cause delay and administrative headaches at a painful time for beneficiaries, and it would be much simpler if pensions were removed from IHT altogether.”