An additional £246 million is obtained by HMRC from grieving families through inheritance tax investigations

According to recent data, HMRC launched nearly 4,000 investigations into unpaid inheritance tax in the year ending in April of last year as part of a more stringent crackdown on families it believes have attempted to avoid paying their entire debt

Last year, HMRC investigated more families for what it thought were unpaid inheritance tax bills, and it was able to recover nearly £250 million in unpaid inheritance tax.

According to a new Freedom of Information request made by TWM Solicitors to HMRC, the number of investigations into underpaid inheritance tax (IHT) increased from 3,793 to 3,977 during the year ending April 5, 2025.

These inheritance tax investigations resulted in an additional 246 million for HMRC, according to the FOI.

HMRC's increased efforts to recover revenue from underreported and misvalued estates are reflected in the rise in investigations, according to TWM Solicitors.

The law firm said it thinks HMRC is aware of the possibility that more families might be tempted to underpay and avoid inheritance tax, which some people believe is unfair, given that the annual inheritance tax take has increased by more than 61% to 8.3 billion since 2020.

According to David Lunn, a partner in TWM Solicitors' private client team, "HMRC's investigations are getting more complicated, especially when it comes to residential property."

"With each budget, the IHT net expands and tax regulations become more complex, so people must make sure they get the right advice. Tens of thousands of pounds may be imposed as penalties.

Why is there an increase in IHT investigations?

According to TWM Solicitors, HMRC is now detecting unpaid tax using artificial intelligence, data-matching, and other sophisticated big data tools. It is consequently becoming more skilled at spotting errors and discrepancies in IHT returns, which leads to an increase in the number of investigations.

As a result of frozen tax thresholds and rising asset and home prices, more people are now required to pay inheritance tax, which also makes evasion more likely.

The IHT nil-rate band has been set at 325,000 since April 2009. In contrast to the not-so-distant past, the tax threshold has increased annually since 1986 until 2009 (with the exception of 1993 and 1994). That's twenty-one increases in twenty-three years, followed by seventeen years without any increases, and no increases are anticipated anytime soon.

According to attorneys, a significant increase in the tax burden may cause more people to evade and avoid paying taxes.

According to TWM, the government's decisions to reduce business and agricultural property reliefs and include unspent pension pots under IHT will probably result in more estates falling under the tax system. According to the firm, this might lead to additional HMRC examination of families' inheritance tax returns.

According to Lunn, "HMRC knows that as the extent of IHT widens, irregularities become more common and therefore the amount of tax, interest and penalties they can recover is likely to rise," which is why the number of inheritance tax investigations has increased.

As an illustration, recent budgets have brought even more assets under the purview of IHT. More difficulties and inquiries follow as a result.

For what reason does HMRC look into inheritance tax returns?

When it suspects mistakes in inheritance tax returns, HMRC looks into the matter. These mistakes frequently include not declaring personal belongings like jewelry and furniture, which many people are unaware should be included.

"In the past, countless IHT investigations have been triggered by failure to declare goods," Lunn stated.

He continued, "Items like jewelry or even a valuable set of dining chairs must be declared at their full market value because HMRC is very strict about what must be included in an IHT return."

Nonetheless, Lunn stated that residential property valuations continue to be a "significant area of friction between HMRC and estates that have to pay IHT" and are the subject of some of the largest and most intricate disagreements between families and HMRC.

Homeowners have been especially hurt by the freeze in IHT thresholds because real estate values have increased significantly in recent years.

In detecting underpayments, HMRC has advanced in sophistication. For instance, it is reported that the tax collector is using information from the Land Registry, the Trust Registration Service, and even Google Maps to contest properties that are undervalued.

The IHT threshold was initially set to ensure that only families with substantial assets would be required to pay the tax, according to Lunn. However, after years of being frozen, even relatively modest families are now discovering that they owe IHT.

"Most people pay the correct amount of inheritance tax," stated a representative for HMRC. To resolve problems and guarantee that the system is still fair, investigations can be launched in situations where it is suspected that someone has not.