Currently the threshold is at £325,000, after which the estate is charged at 40 per cent. But moves have been afoot to raise this threshold.
What was once designed to be a tax on the wealthy, IHT has not kept pace with house price inflation, so anyone with a fairly average property, at least in London and the South East, is likely to be hit.
David Cameron has taken steps to change this and sought to raise the threshold to £1m. The amount raised – which will eventually be just under £6bn – is not substantial in terms of the total tax take, and there are many ways to avoid it, not least by giving away your estate at least seven years before death.
Some have argued that it should be abolished altogether, potentially replacing it with a tax on lifetime receipts.
Nonetheless, an industry has grown up to help people plan for IHT.
It is with owners of a family business where the challenges can be particularly tortuous. It is not simply one’s own personal assets that may be liable to IHT, but a complicated structure of shares, owned by potentially non-working family members.
Shares may qualify for business property relief, which means they can be passed on to one’s heirs IHT-free.
Other changes have been called for, not least aligning the 55 per cent death benefit tax on pensions with IHT.
IHT is one of the more disliked taxes. The deceased will have already paid income tax, VAT and probably stamp duty during their lifetime – for the state to take another swipe after death seems particularly unfair. Many think it is time for reform.
Melanie Tringham is features editor of Financial Adviser