HMRC Intensifies Inheritance Tax Investigations, Recovers £246 Million
HM Revenue and Customs (HMRC) has significantly increased its efforts to recover underpaid inheritance tax, resulting in an additional £246 million collected last year. The tax authority has ramped up investigations, targeting UK households with nearly 4,000 cases identified so far.
Rise in Investigations and Revenue Recovery
According to data from private wealth and family law firm TWM Solicitors, HMRC conducted 3,977 investigations into underpaid inheritance tax in the financial year ending April 2025. This marks an increase from 3,793 investigations the previous year, reflecting a more aggressive approach by the Labour Party government's tax arm.
The surge in investigations has directly contributed to the £246 million recovery, highlighting HMRC's focus on ensuring compliance and clawing back revenue from estates that have underpaid.
Advanced Tools and Data-Matching Techniques
HMRC is leveraging advanced technologies to enhance its crackdown on inheritance tax irregularities. The authority is using artificial intelligence (AI) and data-matching systems to identify discrepancies in tax returns.
Additionally, HMRC accesses data from various sources, including the Land Registry, the Trust Registration Service, and even Google Maps, to cross-reference information and uncover undeclared assets.
Expert Insights on the Crackdown
David Lunn, a partner in the private client team at TWM Solicitors, explained the reasons behind the increase in investigations. "Inheritance tax investigations have risen because HMRC knows that, as the extent of IHT widens, irregularities become more common, and so the amount of tax, interest and penalties they can recover is likely to rise," he said.
Lunn pointed to recent Budgets as a key factor, noting that they have drawn more assets into the scope of inheritance tax, leading to more challenges and investigations. He emphasized that HMRC is very strict about what must be included in an IHT return, requiring items like jewellery or valuable dining chairs to be declared at their full market value.
Challenges and Disputes in Valuations
Disputes over residential property valuations remain a significant area of friction between HMRC and estates liable for inheritance tax. Lunn highlighted that the IHT threshold was originally set for families with significant assets, but after years of being frozen, even families with relatively modest homes are now finding they owe IHT.
He added that HMRC's investigations are becoming increasingly complex, particularly regarding residential property, and warned that penalties can run into tens of thousands of pounds. "With tax rules growing ever more complicated, and the IHT net widening with each Budget, people need to ensure they obtain proper advice," Lunn advised.
The crackdown underscores HMRC's commitment to tightening tax compliance, using modern tools to ensure that inheritance tax is paid accurately and in full, affecting a growing number of UK households.
