The amount of money HM Revenue & Customs received from Inheritance Tax (IHT) fell in 2019/20 for the first time in 10 years.
The taxman brought in £5.2bn through IHT in 2019-20 a 4% (£223m) decrease on 2018-19.
The government department said the drop was likely because of the introduction of the Residence Nil Rate Band in April 2017, which gave married couples and civil partnerships a maximum joint estate of £1m before IHT comes into effect.
The introduction of the rule meant the total number of UK deaths that resulted in an IHT charge also fell in 2017-18 for the first time since 2009-10.
LCP partner Steve Webb said the surge in house prices would typically have led to a substantial increase in IHT revenues for the government.
“The decision by the former Chancellor, George Osborne, to allow families to pass on a million pound family home free of IHT has dented revenues to such an extent that they actually fell last year,” he added. “It is hard to believe that the current Chancellor will not be looking very closely at IHT in a much less favourable light as he tries to fill the hole in his budget.”
AJ Bell senior analyst Tom Selby also took the view that the Residence Nil Rate Band could be subject to review: “The aim of the policy, announced with huge fanfare by former Chancellor George Osborne, was to allow family homes worth up to £1 million to be inherited tax-free. This can be achieved by a couple combining their IHT allowances.
“However, given the parlous state of the nation’s finances, it would be no surprise to see Osborne’s big IHT giveaway come under the microscope as his successor, Rishi Sunak, seeks ways to raise much-needed cash to pay for the nation’s eye-watering Covid-19 debts.”