An increasing number of families are being caught out by unexpected inheritance tax bills on gifts made less than seven years before death.

The number of estates that paid IHT on gifts made less than seven years before death doubled from 590 in 2011/12 to 1,300 in 2020/21, according to HMRC data analysed by Financial Planner and wealth manager Evelyn Partners.

The total sum of IHT paid on gifts also more than doubled from £101m in 2011/12 to £256m in 2020/21, an increase of 153% in monetary terms and 119% in real terms (adjusted for CPI inflation).

The average tax charge payable by beneficiaries on lifetime gifts was £171,186 in 2011/12 and £196,923 in 2020/21.

Ian Dyall, head of estate planning at Evelyn Partners, said: “This data suggests that some pretty significant shock tax bills are being delivered to people. Those who receive generous gifts from older relatives need to be aware that they could be liable for a big tax charge if that relative dies within seven years of making the gift.

“These figures show that a growing number of recipients will have had a potentially unexpected IHT bill to pay, when the donor dies, on a gift that they could have received several years ago. How many had the liquid assets available to pay it? How many had invested the money in illiquid assets like a new home?”

Under current IHT rules, large gifts can be made at any time but if the giver dies within seven years then the gift itself could be taxable or it could be included in the estate for IHT calculations.

Each individual is allowed to give gifts of £3,000 (or £6,000 per couple) under annual gifting allowances.

Small gifts of up to £250 can be made to any number of people in the tax year, provided the total to any one person does not exceed £250. If it does, this exemption does not apply and all gifts would start to use up the £3,000 allowance.

At first, gifts simply erode the IHT nil rate band of £325,000, and can increase the tax due on the estate paid by the executors. But once the cumulative total of gifts over a seven-year period exceeds the nil rate band, the beneficiaries of the gifts become liable for the tax.

According to HMRC, 12% of people will have IHT due either on their death or their partner’s death by 2032–33.

• Evelyn Partners received the data from HMRC following a Freedom of Information request on 17 July. The figures exclude any applicable exemptions or allowances.