HMRC has confirmed an 'inevitable' crackdown on inheritance tax (IHT) compliance, with 5,200 households facing fines totaling up to £3,000 each. Bereaved families have been forced to pay £3 million in penalties to HMRC under the Labour government's tax arm.
Sharp Rise in Penalties
Data obtained under Freedom of Information rules reveals that HMRC hit executors of 5,200 estates with late-filing penalties totaling £3.1 million in 2024-25, averaging £596 per estate. Penalties for failing to submit an IHT return on time start at £100 and escalate to £3,000 after one year.
Expert Reaction
Rachael Griffin, of wealth manager Quilter, described the delays in form-filling as 'inevitable'. She noted: 'As more modest estates are caught, there is a greater tendency to try and handle returns without advice. That creates predictable friction as many executors are navigating this for the first time, running up against a process that is evidence-heavy, deadline-driven and not particularly intuitive. Delays are an almost inevitable outcome, and penalties follow.'
She warned: 'There is a clear risk that the number of penalties intensifies from April. Pension death benefits will move more squarely into the inheritance tax regime, expanding both the number of estates in scope and the complexity of administering them.'
Duncan Mitchell-Innes, of law firm TWM Solicitors, highlighted the complexity of the IHT400 form, which has 122 questions and often requires additional schedules. 'In many cases, this must be supplemented by additional schedules – of which there are more than 30 – depending on the nature of the estate,' he said.
HMRC Response
An HMRC spokesman said it is 'simply not true' that penalties will become more common from next year. He added: 'The reality is we reduced reporting requirements during this period for most non-taxpaying estates. We're constantly looking at ways to simplify returns, and the Government is investing £52 million to simplify and digitalise our inheritance tax service to make the process quicker and easier.'
