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HM Revenue & Customs earned an additional £246million in underpaid inheritance tax last year after upping its efforts to claw back revenue.
The tax authority increased the number of investigations into underpaid inheritance tax to 3,977 in the financial year ending April 2025, increasing from 3,793 the year prior, according to figures from private wealth and family law firm TWM Solicitors.
TWM says HMRC is using AI, data-matching and other big data tools in order to identify inconsistencies in reporting and errors in inheritance tax returns, leading to a higher number of investigations.
HMRC also makes use of data from the Land Registry, the Trust Registration Service and Google Maps, TWM said.
The increase is part of HMRC’s aims to increase revenue from underreported and misvalued estates, TWM added.
The inheritance tax threshold is set to remain frozen until at least April 2028, meaning that an increasing number of families are set to find themselves landed with a tax bill
HMRC will be wise to the fact more families may try to underpay inheritance tax due to frozen thresholds, with many viewing IHT as an unfair levy.
David Lunn, partner in the private client team at TWM, said: ‘Inheritance tax investigations have risen because HMRC knows that, as the extent of IHT widens, irregularities become more common, and so the amount of tax, interest and penalties they can recover is likely to rise.’
One way to help make sure you don’t run afoul of complex rules on inheritance tax is to get advice from a financial professional.
> Find a local financial adviser with Unbiased*
In 2024, the Government took as much as £8.3billion in inheritance tax receipts, an increase of 61 per cent since 2020.
For the first nine months of the 2025/26 financial year, IHT receipts have already reached £6.6billion, this is an increase of £232million year on year.
Lunn said: ‘Recent Budgets are a good example, as they have drawn even more assets into the scope of IHT. That inevitably leads to more challenges and investigations.’
The inheritance tax threshold is set to remain frozen until at least April 2028, meaning that an increasing number of families are set to find themselves landed with a tax bill.
On top of this, pensions are set to be brought into the inheritance tax net from April 2027, further adding to estate values.
The IHT nil rate band has been fixed at £325,000 since 2009, before which it was increased almost every year since 1986.
Many can also make use of a £175,000 residence nil rate band, as well as spousal transfer, bringing the effective allowance for homeowning couples to £1million.
Common errors in reporting IHT include not declaring personal items such as jewellery and furniture.
In many cases, people don’t realise these must be included in calculations.
Lunn said: ‘Not declaring goods has prompted countless IHT investigations in the past.
‘HMRC is very strict about what must be included in an IHT return, so items such as jewellery or even a valuable set of dining chairs must be declared at their full market value.
‘However, disputes over residential property valuations remain a significant area of friction between HMRC and estates that have to pay IHT.’
Lunn added: ‘The IHT threshold was originally set so that only families with significant assets would pay the tax.
‘But after years of being frozen, even families with a relatively modest home are now finding they owe IHT.
‘HMRC’s investigations are becoming increasingly complex, particularly when it comes to residential property.
‘With tax rules growing ever more complicated, and the IHT net widening with each Budget, people need to ensure they obtain proper advice. Penalties can run into tens of thousands of pounds.’
Where can you get inheritance tax advice?
Inheritance tax rules are complicated. And with more estates being drawn into the inheritance tax net, it’s important to get financial advice on anything you’re not sure about.
Proper planning can minimise the amount you need to pay while ensuring you don’t run afoul of complex HMRC rules.
If you’d like support, we’ve partnered with financial adviser, Flying Colours, who can help with advice, planning or coaching:
> Inheritance tax planning – what you need to know to protect your wealth*
You can also use services such as Unbiased, which match you with a local financial professional to help with issues such as inheritance tax planning: