New figures show that the number of IHT investigations rose to almost 4,000 in the last tax year, recovering an additional £246m for the Exchequer.
With recent Budgets widening the scope of IHT and bringing more families into the tax net, we expect HMRC enquiries to keep rising.
Why HMRC is increasing Inheritance Tax investigations
One key driver is the long-running freeze in the IHT nil-rate band at a time when property and asset values have risen significantly.
The threshold at which IHT can apply has remained at £325,000 since 2009. It has not increased with inflation, despite substantial growth in house prices and investment values.
As a result, more estates now fall within the scope of IHT, including families who have never previously had to consider the tax before.
As more estates become taxable, HMRC also expects more errors, omissions, and undervaluations. Some may be accidental, while others may not. Either way, the likelihood of enquiries increases.
Budget changes are bringing more assets into scope
Policy changes announced in recent Budgets are expected to bring more assets into the IHT calculation.
Measures such as bringing unspent pension pots within the scope of Inheritance Tax, alongside changes to Agricultural Property Relief and Business Property Relief, are likely to increase the number of estates affected.
Technology is changing how HMRC investigates estates
HMRC is increasingly using data-matching technology and large datasets to check whether figures declared in IHT returns align with external records.
For estates, this can include cross-checking against sources such as:
- Land Registry information
- The Trust Registration Service
- Other public and private datasets.
Where HMRC identifies discrepancies, it may ask for evidence to support valuations or challenge information that has been reported.
This can make enquiries more technical and more difficult for executors to manage without specialist advice.
Common errors that trigger investigations
Many investigations begin because of misunderstandings rather than deliberate evasion.
Two common problem areas are:
- Personal possessions: items such as jewellery, artwork, and furniture must be included at full market value.
- Property values: disagreements over residential property valuations are increasingly common, particularly where prices have risen quickly.
These are often the areas where executors feel least confident, especially if they are unfamiliar with the assets involved.
How TWM can help
The risk of HMRC challenging IHT valuations is increasing, even for estates that may not appear especially ‘high value’.
If HMRC has concerns about valuations, missing assets, or incomplete records, it may open an enquiry. Additional tax liabilities, interest, and penalties can be substantial, and disputes may take additional time to resolve if not handled carefully.
At TWM Solicitors, our Private Client team advises families and executors on preparing accurate and robust IHT returns. We also support clients through HMRC enquiries, helping you respond clearly, protect the estate, and reach a resolution as efficiently as possible.
If you would like advice tailored to your circumstances, please contact our Private Client team.