The government must reform the UK’s “broken inheritance tax system”, a respected think tank has urged, after fresh research found uncapped exemptions in the current framework means a quarter of estates worth over £10m pay a rate of just nine per cent.

The Centre for Analysis of Taxation (CenTax) paper, published on Thursday, revealed the extent to which allowances to the tax such as Business Relief and Agricultural Relief are leading to vast discrepancies in the amount of inheritance tax (IHT) families pay.

One in six estates worth over £10m pay an effective tax rate of less than four per cent, the research found, while a quarter pay close to the 40 per cent headline rate of IHT.