The wealthy may have underpaid inheritance tax by £343 million, according to HMRC How can one avoid breaking the law?

In order to raise an additional £2 billion through rule changes, the government is expected to increase the "missing" inheritance tax

According to new figures, HMRC believes that wealthy taxpayers underpaid inheritance tax by up to 343 million in the past year, an increase of 18 million from the year before.

Lawyers have warned of an impending crackdown in response to HMRC's annual report, which contains inheritance tax data for the 2024 - 2025 tax year.

Following changes to the inheritance tax rule in April 2026, TWM Solicitors predicts that the numbers for suspected tax avoidance and evasion, or tax under consideration, could rise sharply in the years to come.

Business property relief and agricultural property relief will be reduced in April of next year from 100%, where the majority of farms and family businesses paid no inheritance tax, to 50% on assets over £1 million, meaning that 20% inheritance tax will be owed.

Pensions will also be newly subject to inheritance tax starting in April 2027. The Treasury is anticipated to receive more inheritance tax as a result of both rule changes.

Partner and head of private client Laura Walkley of TWM Solicitors stated: "As HMRC expands the range of assets subject to inheritance tax, including business assets, farms, and pensions, disputes over IHT are probably going to become more frequent.

"HMRC clearly sees underpaid inheritance tax as an area of increasing concern. Because tax avoidance and evasion can result in very large penalties from HMRC, it's critical that IHT calculations be completed accurately and with expert assistance," she continued.

Underreporting inheritance tax carries risks.

There may be an incentive to underreport in order to lower the IHT bill when probates are handled solely by friends and family, according to Walkley.

Values may be purposefully or unintentionally underreported, which would artificially lower the IHT bill.

If these mistakes are found, "HMRC takes a very dim view of this and can impose heavy fines," she stated.

The maximum penalty is 100% of the excess tax owed plus interest at a rate of 0.75% from the due date until the payment date.

Walkley continued, "We anticipate that there will be more disagreements between taxpayers and HMRC regarding IHT, in part due to an anticipated rise in IHT-focused tax investigations from HMRC."

In separate guides, we examine ways to lower an IHT bill and how to avoid inheritance tax through gifts.

Tips for avoiding inheritance tax fines.

Accurately reporting all assets is your best defense against inheritance tax penalties.

HMRC's investigations into suspected underpaid inheritance tax will look for a variety of problems. It seeks out the following types of items.

Intentionally lowering the value of a residential property that is a part of an estate.

This might be done by inflating the degree of damage, estimating the value using an outdated survey, or mistakenly thinking that a "probate valuation" ought to be less than the open market value on the estate's death date.

Not declaring money or other assets on an inheritance tax form.

This may entail failing to disclose gifts like jewelry or artwork that have been given to family members, such as by a lay executor.

A copy of a property's contents insurance has also reportedly been used by HMRC to look for valuable items that might have been left off of an inheritance tax return.

A big cash gift was given more recently, but it was claimed to have been given more than seven years ago.

Generally, inheritance tax is no longer applied to gifts given more than seven years ago. It is expected that HMRC will pay the IHT on the gift if they discover it was given much more recently.