HMRC Recovers £246m More in Inheritance Tax Probes

Last year, a greater number of bereaved families faced intense scrutiny from HM Revenue and Customs (HMRC) regarding suspected unpaid inheritance tax obligations. The tax authority managed to recover nearly £250 million in outstanding inheritance tax payments through these efforts.

According to a Freedom of Information request submitted by TWM Solicitors to HMRC, the volume of inquiries into underpaid inheritance tax (IHT) climbed from 3,793 to 3,977 during the year ending April 5, 2025. This uptick highlights HMRC’s heightened focus on ensuring compliance in estate taxation.

Reasons Behind the Surge in Inheritance Tax Investigations

HMRC has increasingly turned to artificial intelligence, sophisticated data-matching techniques, and advanced big data analytics to uncover unpaid inheritance tax liabilities, as revealed by TWM Solicitors. These technological advancements have sharpened the agency’s ability to spot discrepancies and mistakes in submitted IHT returns, leading to a notable increase in formal investigations.

Escalating house prices and broader asset value growth, coupled with stagnant inheritance tax thresholds, have drawn more estates into the taxable bracket. This dynamic not only boosts the number of people liable for IHT but also heightens opportunities for unintentional errors or deliberate avoidance.

The inheritance tax nil-rate band has remained fixed at £325,000 since April 2009. This contrasts sharply with historical trends: from 1986 until 2009, the threshold increased annually in 21 out of 23 years, excluding brief pauses in 1993 and 1994. However, the past 17 years have seen no adjustments, with no changes anticipated in the foreseeable future.

Legal experts note that abrupt expansions in tax liabilities often correlate with heightened instances of evasion and avoidance strategies as individuals and families adapt to the new fiscal pressures.

Government policies expanding IHT to encompass unspent pension pots and reducing reliefs for agricultural and business properties are poised to ensnare additional estates within the tax system, according to TWM Solicitors. The firm anticipates that these shifts will intensify HMRC’s examination of inheritance tax submissions from grieving families.

TWM’s representative, Lunn, explained: “The rise in inheritance tax investigations stems from HMRC’s recognition that an expanding IHT scope naturally leads to more irregularities. Consequently, the potential for recovering tax, interest, and penalties grows substantially.”

He further elaborated: “Recent Budget announcements exemplify this trend, incorporating more assets under IHT purview. Such expansions inevitably provoke additional disputes and probes by the tax authority.”

Common Triggers for HMRC Inheritance Tax Probes

HMRC launches investigations into inheritance tax returns when it suspects inaccuracies or omissions. Frequently overlooked items include personal belongings like jewelry, furniture, and other household goods, which many individuals fail to recognize as reportable assets.

Lunn pointed out: “Omitting such personal goods has triggered numerous IHT investigations historically.” He emphasized: “HMRC enforces stringent rules on IHT disclosures, requiring full market value declarations for items ranging from jewelry to a premium set of dining chairs.”

Nevertheless, the most substantial and intricate conflicts between families and HMRC often center on valuations of residential properties, which continue to represent a major point of contention for estates subject to IHT, according to Lunn.

The prolonged freeze on IHT thresholds has hit homeowners especially hard, given the dramatic surge in property values over recent years. This combination has transformed what were once modest estates into taxable ones.

HMRC’s detection capabilities have evolved significantly, enabling it to pinpoint underreported amounts with greater precision. For instance, to contest undervalued property assessments, the agency leverages information from sources like the Land Registry, the Trust Registration Service, and even satellite imagery from Google Maps.

Lunn observed: “The IHT threshold was designed to target only those with substantial wealth. Yet, after years of stagnation, even households with average properties are now confronting unexpected IHT bills.”

In response, an HMRC spokesperson stated: “Most individuals settle the appropriate inheritance tax amount accurately. When underpayment is suspected, we initiate investigations to rectify matters and uphold the fairness of the tax system.”

As tax regulations become increasingly labyrinthine and the IHT net continues to broaden with successive Budgets, families are urged to seek professional guidance. Failure to do so can result in penalties amounting to tens of thousands of pounds, compounding the financial strain during an already difficult period of loss.