The number of inheritance tax (IHT) investigations launched by HM Revenue & Customs has soared by more than a third over the past year, as the government intensifies efforts to crack down on underpayment and boost Treasury revenues.
New figures obtained through a Freedom of Information request by accountancy firm Price Bailey reveal that HMRC opened 4,171 formal IHT investigations in the year to April 2025, up from 3,028 the previous year—a 37% jump.
The surge underscores a renewed focus from the tax authority as it seeks to recover what it believes are significant sums lost through misreporting or under-valuation of estates. HMRC recovered a record £8.2 billion in inheritance tax in the past year alone, driven in part by frozen tax thresholds, rising property prices, and growing asset values.
Executors responsible for managing estates are required to file an IHT return within 12 months of death, though any tax owed must be paid within six months to avoid accruing interest—currently charged at 8.25%. Where HMRC suspects an estate has been undervalued—whether through innocent oversight or deliberate evasion—it can trigger an investigation.
Experts say the investigations are often prompted by undervaluations of property, omitted assets, or complex gifts that fall under the “seven-year rule”, which allows gifts to escape IHT if the donor lives for at least seven years after giving them.
“The tax office has significant powers at its disposal,” said Nikita Cooper, tax partner at Price Bailey. “We’ve seen a notable rise in the number of cases where HMRC is using detailed data—including bank statements, investment histories and even foreign currency transactions—to scrutinise IHT returns more closely.”
Damian Bloom, partner at law firm Taylor Wessing, said the rise in investigations was being driven in part by greater access to data and increasingly sophisticated analytics. “As HMRC adopts more artificial intelligence tools, we expect this trend to accelerate,” he added.
IHT is charged at 40% on the value of an estate above the nil-rate band of £325,000. For estates that include a home passed on to a child or grandchild, a further £175,000 residence nil-rate band may apply, subject to the estate being worth less than £2 million. Together, a married couple or civil partners can pass on up to £1 million tax-free. These thresholds have been frozen until at least 2030.
More families are now finding themselves caught in the IHT net, particularly as property and pension values have soared over the past decade. From April 2027, the rules will tighten further, with unused defined contribution pension pots included in the taxable estate—likely adding to both liabilities and compliance risk.
Fiona Fernie, partner at Blick Rothenberg, said: “As families and advisers adapt to these new rules, we’re likely to see more mistakes—or perceived mistakes—leading to further scrutiny from HMRC.”
She added that while many people believe the system is unfair, especially amid rising asset inflation, attempts to reduce tax liabilities—however legal—can often trigger closer inspection.
HMRC insists that the “vast majority” of estates pay the correct tax and that investigations are only opened where there is evidence of underpayment. “Cases can range from genuine errors to deliberate attempts to evade tax,” a spokesperson said, adding that those who disagree with an HMRC assessment can appeal.
For families navigating bereavement and estate administration, the message is clear: careful and transparent valuation of assets—and early expert advice—can reduce the risk of being caught up in an IHT probe.
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HMRC inheritance tax investigations surge 37% as treasury seeks to plug revenue gap
