The total number of UK deaths that resulted in an inheritance tax (IHT) charge has increased to 27,000 estates in the tax year 2020-21, an increase of 4,000 (17%) since the previous tax year, revealed HMRC analysis, accounting for 3.7% of deaths.

The average bill for inheritance tax was £214,000, down by a minimal 1% on the previous year. This raised a record £5.76bn in taxes, up 16% in a single year, and a figure which is set to rise to at least £8bn by 2028.

Estates valued at over £1m were liable for 81% of the tax paid, raising £4.7bn of revenue, but they only account for 4.3% of all affected estates.

Although inheritance tax is set at 40%, the average rate paid was 13% due to tax free allowances, reliefs and exemptions.