HMRC's crackdown on inheritance tax investigations catches another 1,200 families

HMRC has the authority to investigate the deceased person's financial affairs and collect any unpaid inheritance taxes when there is a suspicion that they have been underpaid

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According to recent statistics, HMRC has launched over a thousand additional investigations into families in which it suspects underpayment of inheritance tax.

Official investigations into family financial matters increased to 3,961 during the 2024 - 2025 fiscal year. This represents a 41% increase from the 2,807 recorded the year before.

If HMRC discovers or suspects errors or omissions in an estate's asset reporting, it may initiate an inheritance tax investigation into that estate.

This can occur when a sizable gift is given prior to death in an attempt to evade inheritance tax, or when assets are believed to have been undervalued for inheritance tax purposes.

An estate's inheritance tax, which can reach 40 percent, must typically be paid within six months of the death. However, up to 20 years after the IHT is paid, HMRC may still review estate valuations.

"HMRC has significant investigative powers and will check a range of sources to build a picture of the deceased individual's financial affairs where there is a suspicion inheritance tax has been underpaid," stated Sean McCann, chartered financial planner at NFU Mutual, which obtained the data through a Freedom of Information request.

In separate articles, we examine common IHT myths and strategies for lowering your inheritance bill.

What occurs if inheritance tax is not paid in full?

If HMRC believes you have underpaid inheritance tax, one of its investigative options may be to examine your bank statements to find any income that might indicate the presence of hidden assets like real estate or investments, or substantial foreign exchange transactions.

"HMRC conducts these investigations thoroughly. For instance, they will examine expenses like life insurance premiums that, if not written in trust, will be included in the taxable estate or gifts given during the seven years prior to death, McCann stated.

The interest rate that executors pay on past-due inheritance taxes is 8 percent, which can significantly increase the bill. This may exacerbate a situation that is already difficult and upsetting for many people. It may take months or even years to finish an investigation.

Families can handle any possible compliance check and supply the information required for the inheritance tax return more easily when they maintain accurate records. Records of any gifts given, appraisals acquired, and information about any foreign investments or assets are all included in this.

"You can record your gifts, income, and expenses on the final page of the HMRC IHT403 form that is accessible on the HMRC website," McCann explained, "if you're taking advantage of the gifts from normal expenditure exemption."

"The likelihood of any penalties or interest payments is decreased if it is done correctly the first time.

According to HMRC's FOI, "Most people pay the right amount of IHT. When compliance problems are identified, investigations are launched to make sure that everyone pays the correct amount of taxes.

Will inheritance tax be required of me?

The most recent data from HMRC shows that in 2022 - 2023, about 3,700 additional deaths led to inheritance tax. This raises the total to 31,500 taxpaying IHT estates, which is 13% more than the year before.

The most recent HMRC data indicates that the government received 2.22 billion in inheritance tax revenue from April to June 2025. Compared to the same time period in 2024, this represents an extra 134 million. As a result, inheritance tax revenues for the current fiscal year are 6% higher than those for the same period last year, which set a record.

Since the 325,000 and 175,000 residence nil rate bands are set to remain frozen until 2030, experts predict that more families will fall under the inheritance tax net, resulting in ever-increasing bills for those impacted.

"We will see many families lose part or all of the residence nil rate band that allows them to pass a share of their home tax free to direct descendants as it is eroded by 1 for every 2 over 2m," McCann stated. This is because pensions will be added to the taxable estate starting in April 2027.

Many people have to worry about more than just inheritance tax on their pension funds; if they exceed the 2 million threshold, they risk losing all or part of their tax-free residence nil rate band, which would increase their overall tax burden.

Learn More about HM Revenue and Customs.