How the Treasury is raking in close to document ranges of inheritance tax

Grieving families handed over £2.8billion in inheritance tax in the first four months of the tax year with growing numbers being dragged into the net.

The Treasury raked in an extra 9 per cent — or £230million — between April and July compared with the same period last year, official figures have revealed.

The dreaded 40 per cent death duty raised £749million in July — the second highest month on record.

Thousands of middle-class households who have lost their loved ones have been forced to pay inheritance tax as the threshold at which you must begin to pay it has been frozen until at least April 2028.

This means that, as property prices and asset values increase, more families are being dragged into paying the duty in a process known as fiscal drag.

The first £325,000 of inheritances are tax free, but above this they are taxed at 40 per cent.

This threshold has not increased since 2009.

There is an additional allowance of £175,000 when the family home is left to ‘direct descendants’ such as children or grandchildren.

This has also been pegged until 2028.

Across all taxes, HMRC collected a total of £82.5billion last month — the highest receipts ever for the month of July, according to Joe Neal of tax firm Blick Rothenberg.

But the increase in inheritance receipts has reignited rumours that Britian’s most hated tax could be hiked as Chancellor Rachel Reeves tries to plug a claimed £22billion ‘black hole’ in public finances.

Stephen Lowe, of retirement specialist Just Group, said: ‘With the Autumn Statement in two months’ time, it seems inevitable that the Chancellor will at the very least run her slide rule over inheritance tax to see if it’s a way to raise more revenue.

‘We will have to wait and see if Rachel Reeves decides that inheritance tax can work even harder for the Treasury.’