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Inheritance tax (IHT) has long been referred to as a "voluntary tax", due to the fact that there were so many ways that you could avoid paying it (legal methods, I should stress). However, although the number of estates paying IHT has fluctuated around the 20,000 level since 1987, this figure has increased significantly in the last two years. It's reckoned that 30,000 estates (representing around 5% of the 600,000 people who die each year) will have to pay IHT in 2003/04. That number is expected to rise to 32,000 in 2004/05, according to a recent report by the National Audit Office. In future years, the number of people getting caught by IHT is likely to continue to rise. That's because we Brits, and we hope a fair proportion of Fool users, are getting wealthier far more quickly than the threshold for IHT is rising. For this tax year, the threshold is £263,000, with anything above this limit liable to tax at 40%. For 2004/05, the threshold will increase by 3% to £272,000. However, thanks to various reliefs, many people with estates valued at over £263,000 will end up paying no IHT. In fact, if recent trends are anything to go, around 50,000 people will die this year with estates valued at greater than £263,000, but only 30,000 will end up paying IHT. The various reliefs you can use to sidestep a nasty IHT bill are described in this article, the spouse exemption being by far the most widely used and valuable. Of course, you can always Spend the Kids' Inheritance as an alternative! Although it's tempting to put off planning for IHT, there are many things that you can in your lifetime to reduce the amount of tax payable. But it's also possible to apply for a Will to be varied for up to two years after someone dies, simply to reduce the amount of tax due. Personally, I rather like the idea of a posthumous blow to the taxman!