Thousands face inheritance tax crackdown as HMRC collects £246million in underpayments

HMRC investigators are understood to be drawing on records held by the Land Registry and Trust Registration Service, while also utilising Google Maps to spot potential discrepancies in estate valuations.

This multi-agency approach allows officials to verify property details and asset declarations against independent data sources.

The crackdown reflects growing scrutiny of estates as more families find themselves liable for the 40 per cent levy on assets exceeding the tax-free threshold.

The surge in investigations stems largely from inheritance tax thresholds that have remained unchanged since 2009, dragging ever more families into the tax net.

Assets above £325,000 attract the 40 per cent charge, though this rises to £500,000 when a property passes directly to children or grandchildren.

Married couples and civil partners who combine their allowances can shield up to £1million from the taxman.

Yet these figures have failed to keep pace with rising property prices, meaning even relatively ordinary family homes in London and the south-east now exceed the threshold.

The situation will worsen from April 2027, when pension pots become subject to inheritance tax for the first time, pulling significantly more estates into HMRC's reach.

Those administering estates face mounting pressure from strict payment deadlines, often while navigating the inheritance tax system for the first time.

TWM Solicitors warned that these compressed timeframes frequently force executors to submit estimated valuations based on their best judgement at the date of death.

Problems arise when properties eventually sell years later, sometimes revealing significant gaps between initial estimates and actual market values, resulting in both underpayments and overpayments.

Certain categories of possessions prove especially problematic to value accurately, with jewellery, antiques and furniture particularly prone to errors or being overlooked entirely.

Gifts made during the deceased's lifetime also trigger frequent compliance checks and disputes, especially where documentation is incomplete.

Executors bear personal responsibility for ensuring correct tax payments, meaning HMRC can pursue them directly for any shortfall discovered after an estate has been distributed.

Despite the crackdown on underpayments, HMRC has simultaneously processed a substantial number of refunds where estates overpaid the levy.

Analysis of HMRC data by The Telegraph revealed that more than 6,000 estates received money back last year, with refunds totalling in excess of £300million.

Declining asset values, particularly in the property market, have driven this trend as homes sell for less than their initial estimated worth.

Executors seeking to reclaim overpaid tax on property must do so within four years of the sale, using form IHT38.

For shares and investments that have fallen in value, the window is considerably shorter at just twelve months, requiring form IHT35.

Those successfully reclaiming overpayments may also be entitled to interest at a rate of 2.75 per cent.

For wealthy individuals disposing of business interests, legitimate planning strategies exist to mitigate future inheritance tax liabilities.

James Bulman, Director and Financial Planner at Smith & Pinching, told GB News about a recent client who sold shares in a major care provider, leaving him with £8 million after capital gains tax.

"We can set up a family investment company where you loan it to your family investment company," Bulman explained, describing how shareholding structures involving spouses and children can be combined with trusts to reduce the tax burden.

The arrangement involves investing in UK assets generating corporation tax-free income to fund retirement, while the loan is gradually repaid during the individual's lifetime.

"That's a thing that I think a lot of people miss when they sell a business," Bulman noted, adding that high net worth clients should consider such vehicles as a means of preserving their legacy.