HM Revenue and Customs (HMRC) has recouped £246 million in unpaid inheritance tax through roughly 4,000 compliance investigations over the past year, according to the latest official figures. The intensified enforcement comes as a growing number of families are drawn into the inheritance tax (IHT) net,
Largely due to static thresholds and rising property values. HMRC’s data-driven crackdown utilises a multi-agency approach to verify asset declarations and property valuations, increasing the pressure on estate administrators to ensure accuracy and compliance.
HMRC increases inheritance tax enforcement
HMRC has significantly increased its investigatory activity on estates, focusing on potential underpayments of inheritance tax. These efforts have been driven by advanced data cross-referencing between government bodies, including the Land Registry and Trust Registration Service.
The scrutiny is aimed at ensuring assets are properly valued and declared. Officials have also drawn on external digital tools, such as online mapping services, to validate property details and flag inconsistencies in reported estate values.
How inheritance tax investigations are conducted
Inheritance tax is levied at 40 per cent on assets above £325,000, with a higher threshold of £500,000 when residential property is left directly to children or grandchildren. Married couples and civil partners can combine allowances, sheltering up to £1 million from IHT liability.
Compliance teams assess records across official channels to detect discrepancies, such as undeclared properties or undervalued possessions.
According to tax professionals, investigators frequently examine lifetime gifts, jewellery, antiques, and other items prone to misvaluation or omission on tax returns.
Changing thresholds and the impact on families
Inheritance tax thresholds have remained unchanged since 2009. Rising property prices particularly in London and the south-east have caused more families to exceed the nil-rate band. The static nature of these thresholds has resulted in a significant increase in households subject to IHT.
From April 2027, scheduled changes will see pension pots included within the inheritance tax net for the first time, potentially increasing the number of estates facing a liability.
The widening scope of the tax and growing property values have heightened concerns among middle-income families.
Challenges facing estate executors
Those responsible for managing estates face compressed deadlines for settling inheritance tax liabilities, often having to navigate complex rules for the first time.
Legal and financial advisers warn that executors may be compelled to submit estimated valuations due to time constraints, with the risk of later adjustments following the actual sale of assets.
Misvaluations can result in either underpayments, subject to HMRC investigation, or overpayments, which require subsequent claims for refund. Lifetime gifts lacking documentation also generate disputes and compliance reviews, particularly if records of value and transfer are incomplete.
HMRC processes inheritance tax refunds
Alongside its crackdown on underpayments, HMRC has issued more than £300 million in refunds to over 6,000 estates over the past year. These refunds have occurred where initial valuations exceeded final realised values, often due to falling property or investment prices.
Executors seeking to reclaim overpaid tax must submit specific forms within set deadlines: four years from the property sale using form IHT38, or twelve months for shares and investments with form IHT35. Successful claimants may also receive interest at an official rate, currently 2.75 per cent, according to HMRC.
Final Summary
HMRC’s recent recovery of £246 million from inheritance tax underpayments reflects a strengthened approach to compliance as more estates surpass long-standing thresholds. The use of cross-referenced data and stringent enforcement has increased the onus on executors to provide transparent, accurate valuations.
At the same time, shifting property values have led to substantial tax refunds for overestimated estates. With the inclusion of pension pots in IHT calculations from 2027, further changes are expected to draw additional families into the tax net.
Those administering estates are urged to seek up-to-date guidance to navigate evolving regulations. For detailed updates and tailored financial insights, the Pie app remains a valuable resource for users.
