The estate and letting agents firm said that an increase of £0.8 billion in IHT revenues between April 2024 and March 2025 shows that more and more people are being drawn into this tax.

The annual total is now £8.2bn and is set to increase substantially in the coming years. The Labour Government is planning further changes to IHT to pull in even larger revenues in the future. From April 2027 it is reported that they intend to target £1 trillion of retirement savings held in private pension pots. It is anticipated that this move will increase the number of estates liable for IHT by a quarter.

The Institute for Fiscal Studies said that the proportion of estates hit by IHT was likely to rise from about 5.5% currently to 7% in 2032-33. Over the same period, government annual revenues from the tax will rise from £8bn to £15bn.

IHT has had its threshold frozen at £325,000 since 2009 and is currently set to remain at that level until 2030 at the earliest. Had it risen by inflation in the intervening years it would be at £510,921 by March 2025.

Of further concern is a recent report which showed that thousands more grieving families are facing investigations into their inheritance tax liabilities as HMRC seeks to target underpayments. The Revenue launched 3,961 investigations in the year to 5 April which is an increase of 31% on the previous year. Underpayments can be due to flawed asset valuations, errors, or simply misunderstanding the compliance issues. With interest charged on overdue IHT standing at 8.5% – which is the highest rate for 18 years – these can be costly investigations for the bereaved beneficiaries.

As well as the financial cost there will also be an emotional cost to families. With the average inquiry taking 558 days – during which time the executors are blocked from distributing the estate to the beneficiaries – this can be a prolonged and painful process at a difficult time.

David Alexander, chief executive of DJ Alexander Ltd, explained: “The UK government likes to present inheritance tax as only hitting the very wealthiest in society.

“The truth is that the richest have accountants and advisers to severely reduce their liability while it is those with smaller estates who will be drawn into paying this tax.

“Many more people will exceed the threshold - which at £325,000 is around the average cost of a home in some parts of Scotland – because of their long-term ownership of a property which is their home. Simply owning a property for forty years will have put many people beyond the IHT threshold and liable for quite punitive rates of tax.”

Mr Alexander continued: “Given that the government also intend to target private pensions of individuals then it would appear that thrift and saving are now seen to be the wrong thing to do, and individuals and their grieving families will be punished for it.

“Indeed, many advisers are now recommending that people with valuable homes, assets, and pensions should start to spend their children’s inheritance rather than lose it to HMRC. While this may seem counter intuitive to generations brought up with the idea that working, saving, and accumulating assets to pass on to the next generation is a worthwhile thing to do, this view is now to be discouraged because you will lose it all to the taxman.”

He concluded: “It can’t be right that a homeowner who wishes to pass on something to their family should be punished for buying a home which has risen in value beyond £325,000.

“Taxing thrift, savings, and aspiration should never be government policy. But homeowners are seen as an easy target as they cannot hide their main asset, which is their property, so policymakers see this as a simple way to raise revenue. But there is little doubt that inheritance tax – which is already widely perceived to be a deeply unfair tax – is likely to become even more unpopular as the government shifts its focus on to pensions as well as homes.”