HMRC open up extra 1000 IHT investigations over the last 12 months

It is claimed HMRC has opened more than one thousand extra investigations into families who may not have paid the right amount of inheritance tax (IHT). 

A freedom of information request by NFU Mutual suggests the number of HMRC investigations into families’ financial affairs has increased from 2807 in 2023/24, to 3,961 in the tax year 2024/25 – a 41% increase.

Sean McCann, chartered financial planner at NFU Mutual said

 “Where there is a suspicion inheritance tax has been underpaid, HMRC has substantial investigatory powers and will check a range of sources to build a picture of the deceased individual’s financial affairs.”

reminding us the body can check on estate valuations as much as 20 years after payment of the IHT.

More estate continue to pulled into the IHT net as the impact of the Government’s decision to maintain the IHT thresholds at their 2020/21 levels continues to bite. The latest Inheritance Tax liabilities statistics published for 2022/23 shows 4.62% of UK deaths resulted in an IHT, a small increase of just under a quarter of a percent on the previous tax year. 31,500 estates were liable for IHT, an increase of 3,700 (13%) since 2021/22; but the overall proportion of estates liable for IHT remains relatively static at fewer than one in 20.

The overall IHT liability for 2022/23 was £6.70bn, a rise of £710m (12%) year on year; the result of a higher volumes of wealth transfers following recent IHT-liable deaths, continued rises in asset values, and the freezing of the residence nil rate band (RNRB). HMRC said the average effective tax rate paid by taxpaying estates was 13% (compared to the headline marginal rate of 40%), reflecting the impact of exemptions, reliefs, and tax-free allowances.

And proposals to include pensions assets in the value of the estate are expected to increase IHT liability by around £34,000 according to government estimates.