Quick Answer: Bereaved families across the UK are subject to a review of their paperwork. HMRC is investigating thousands for underpaid inheritance tax, opening more than 14,000 compliance checks since April 2022. Frozen thresholds and rising house prices are pulling more estates into the net, and more errors are being caught.
Inheritance Tax (IHT) is a UK tax charged on the estate — the money, property, and possessions — of someone who has died, if the total value exceeds a set threshold. An IHT investigation is when HMRC formally checks whether the amount reported by executors matches what is actually owed.
Quick Fact: The taxman opens an inheritance tax (IHT) inquiry when the figures reported by executors do not match the data it already holds. Most people pay the right amount. But with more families now liable, checks are climbing fast.
Who This Guide Is For : This guide is written for UK executors, beneficiaries, and family members managing a deceased relative’s estate in 2026.
It’s best suited for anyone valuing an estate, filing an IHT return, or responding to an HMRC compliance letter — particularly executors handling property, business assets, or gifts made before death.
Use this guide to understand what triggers an HMRC investigation, how long checks take, and what steps reduce your risk before you submit your return.
- More than 14,000 IHT investigations have been launched since April 2022, according to figures obtained by NFU Mutual.
- As per Yahoo, 3,636 probes were opened between April and December 2025 alone, around a quarter of the total.
- Around 40% of enquiries end with the bill being adjusted.
- Late IHT accrues interest at 7.75%, charged daily from six months after death.
- Pensions enter the IHT net from April 2027, dragging in an extra 50,000 estates.
Why HMRC is Investigating Brits For Underpaid Inheritance Tax
The pattern is clear across every recent report. New enquiries jumped 33% in the three years to April 2025, from 3,163 to 4,200. Separate data from The AOL puts last year’s total at a six-year high, with nearly 5,000 families investigated.
The reason is money. IHT receipts hit a record £7.1bn between April 2025 and January 2026. Wealth firm TWM Solicitors clawed back an extra £246m in a single year as checks intensified.
The Office for Budget Responsibility expects the annual tax take to climb from £8.7bn this year to roughly £14.7bn by 2030/31, nearly doubling in five years.
How Inheritance Tax Works
IHT is charged at 40% on anything above the £325,000 nil-rate band. Pass a home to your children or grandchildren, and you gain a further £175,000 allowance. Couples can combine both, shielding up to £1m tax-free.
The catch is the taper. For every £2 an estate sits above £2m, £1 of the residence allowance is lost. Estates squeaking just under that £2m line are prime targets.
The bill falls to executors, who must value the estate and tell HMRC what is owed. Payment is due by the end of the sixth month after death. Miss it, and interest starts stacking up.
Also read: Will the New State Pension Be Taxed From April 2027?
How the Taxman Finds Mistakes
HMRC uses a data system called Connect. David Wright, of the Association of Taxation Technicians, describes it as “a big spiderweb that pulls data from lots of different places”. It cross-checks IHT returns against bank records, the Land Registry, the Trust Registration Service and even Google Maps.
Investigators dig deep. They scan bank statements for undeclared income, hidden gifts and large transfers made within seven years of death. Social media is fair game too, as a modest estate paired with three yearly trips to the Maldives raises eyebrows.
Some relief claims invite extra questions. Helen Thornley recalls: “I used to work on a lot of farming cases, and I once got a letter asking, ‘How many sheep are in this field?’ It can get very detailed.”
What Triggers an Enquiry
Common flags, highlighted by consumer champion Which?, include undervalued property checked against Land Registry sales, unreported jewellery or art, life insurance not written in trust, and gifts with “reservation of benefit”, where you give your home away but still live in it.
Between 2021 and 2026, nearly 2,500 such gifts worth £840m were ruled not exempt, landing families with a £336m bill.
Also read: Why HMRC ISA Tax Changes are Causing Concern Among Savers
What an Investigation Feels Like
HMRC sends an “opening letter” to executors, requesting records with a deadline. A typical case runs six to twelve months, though complex ones drag on for years. Careless or deliberate errors carry penalties of 30% to 100% of the extra tax.
Nikita Cooper of Price Bailey warns: “Many formal enquiries do not lead to any additional tax, but they still impose a significant administrative and emotional burden on families who have already complied with the rules.”
An HMRC spokesman said: “The vast majority of people pay the correct inheritance tax. Where we identify a risk that a return may not be accurate, we carry out checks to ensure everyone pays the right tax.”
How to Protect Your Estate
Research by Standard Life found 76% of advisers report clients worried about looming IHT changes. Keep clear records of gifts, valuations and overseas assets.
Never gift something you still benefit from. If your estate holds property, a business or large gifts, take professional advice. As This Is Money notes, penalties can run into tens of thousands.
FAQs
Q. How far back can HMRC investigate inheritance tax?
A. HMRC can look back up to 20 years for deliberate errors, six years for careless mistakes and four years for innocent ones. Gifts made within seven years of death always count.
Q. How long does an IHT investigation take?
A. Most last between six and twelve months. Complicated estates, especially those involving property disputes or trusts, can run for several years.
Q. What are the penalties for underpaying inheritance tax?
A. Penalties range from 30% to 100% of the extra tax owed, depending on whether the error was careless or deliberate. Interest of 7.75% is added on top.
Q. Does HMRC check bank accounts after death?
A. Yes, investigators review bank statements for undeclared income, unreported gifts and large transfers made in the seven years before death.
Q. What is the £2m inheritance tax threshold?
A. Once an estate tops £2m, the £175,000 residence allowance tapers away by £1 for every £2 over the limit. Estates just below often attract closer scrutiny.
Q. Do I pay inheritance tax on gifts?
A. Gifts given more than seven years before death are usually tax-free. Anything given within seven years, or gifts you still benefit from, may be taxed.
Sources & References:
- Yahoo – 3,636 probes were opened between April and December 2025 alone.
- Which – Undervalued property checked against Land Registry sales, unreported jewellery or art, life insurance not written in trust, and gifts with a “reservation of benefit” can trigger an HMRC enquiry.
- This Is Money – Penalties can be in tens of thousands.
- AOL – Last year’s total was a six-year high, with nearly 5,000 families investigated.
