HMRC opened 4,940 formal inheritance tax (IHT) investigations during the 2025–26 tax year—an 18% increase on the previous year and the highest number for six years. A further 4,965 estate returns were referred to compliance teams for review.
An investigation does not necessarily mean deliberate tax avoidance is suspected. Around 60% of recent compliance checks resulted in no amendment. Nevertheless, an enquiry can create months of additional work for executors and may lead to tax demands, interest or penalties.
The rise reflects several factors. The standard £325,000 nil-rate band has been frozen since 2009, while property and investment values have increased. More estates are consequently falling within the IHT system, giving HMRC more returns—and potentially more inconsistencies—to examine.
Six common mistakes can increase the likelihood of an enquiry:
- Undervaluing property. A valuation substantially below comparable local sales is likely to attract attention. A qualified surveyor should consider the property’s condition, location and development potential.
- Keeping inadequate gift records. Executors need details of significant lifetime gifts, including their dates, recipients, values and any exemption claimed. Gifts may remain relevant for seven years. Taper relief can reduce tax on certain gifts made three to seven years before death, but only where tax is payable on the gift itself.
- Continuing to benefit from an asset after gifting it. Giving a home to children while continuing to live there rent-free may constitute a “gift with reservation”, leaving the property within the estate.
- Missing assets. Bank accounts, investments, valuables, digital assets and business interests should all be documented.
- Leaving inconsistent information. Differences between valuations, financial statements and supporting records can prompt HMRC to request clarification.
- Overlooking overseas holdings. Since April 2025, long-term UK residents—generally those resident for at least 10 of the previous 20 tax years—may be liable on worldwide assets.
Executors can be personally liable if an IHT return is submitted without reasonable care. Clear records, defensible valuations and timely professional advice can therefore protect both the estate and those administering it.
If you would like advice on how to record any gifts, as well as help on how to improve your overall efficiency for Inheritance Tax, please contact us.
