HMRC pulls in £650m with inheritance tax trap HMRC has clawed back £650m due to complex inheritance gifting rules in the past three years. In 2019/20, the tax office ordered families to pay £244m in inheritance tax on gifts made during the lifetime of a deceased family member. Gifts of more than £3,000 are typically subject to up to 40% IHT if the giver dies within seven years of making them. The tax charged on such gifts has been growing year-on-year due to a surge in property prices. Families lost £197m in 2017/18, rising to £201m in 2018/19 and then to £244m in 2019/20. Shaun Moore of investment business Quilter said: “The annual exemption has remained unchanged for over 40 years. Since then, inflation has made this exemption much less useful, meaning more people are having to breach the allowance to provide meaningful gifts. It is clear that the gifting laws need bringing up to date.” John O'Connell of the TaxPayers' Alliance, said the £650m tax trap demonstrates how “unfair the whole system of inheritance tax is, with households punished when loved ones die unexpectedly.” He added: “As well as hammering families that fall foul of the rules, it also acts as a distortion to the tax system by encouraging the premature transfer of assets.”