Inheritance tax crackdown on thousands as HMRC launches ‘substantial investigation’ – do you owe money?

Inheritance tax crackdown on thousands as HMRC launches ‘substantial investigation’ – do you owe money?

Income Tax should be cut by 1p in Budget, says Jonathan Gullis

Patrick O'Donnell

By Patrick O'Donnell

Published: 05/02/2024

- 19:04

Updated: 06/02/2024

- 12:40

Inheritance tax may be charged on someone’s estate above a certain threshold after they have passed away, including their money, possessions and property

HM Revenue and Customs (HMRC) has launched an investigation into thousands of families who may not be paying enough inheritance tax (IHT).

More than 2,000 households are reportedly under investigation with many not realising they are liable to pay the tax.

According to financial planning firm NFU Mutual, HMRC has opened 2,029 IHT investigations between April and November 2023.

The taxman clawed back £172million over the period in underpaid death levies with more money being generated thanks to rising house prices and frozen tax allowances.

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Worried man looking at computer

IHT is a levy which is paid on someone's estate after they have passed away


A sizable proportion of the inheritance tax recovered will come from HMRC investigations opened months and years ago.

For the 2023-24 tax year, the Treasury is estimated to raise £7.6billion from IHT which is a £500million rise from 2022-23.

As is stands, inheritance tax is charged at 40 per cent on estates which exceed the “nil rate” allowance of £325,000.

This threshold is raised to £500,000 if the main home is left to a direct descendant with anything left to a spouse or civil partner being exempt from the levy.

In 2022-23, over 3,100 investigations were opened with £251million recovered by HMRC over the period.

Inheritance tax bills must be paid within six months of an individual’s death with the tax authority investigating estates if there is a suspicion the levy has been underpaid or avoided.

Sean McCann, a chartered financial planner at NFU Mutual, reminded taxpayers of the “substantial powers” the Government has to carry out this crackdown.

He explained: “HMRC has substantial investigation powers if it suspects inheritance tax has been underpaid through error, omission or by undervaluing assets.

A sign for HMRC

HMRC is cracking down on households which are not paying the levy


“It will check other information sources to build up a picture of the deceased and their financial affairs — including bank statements or looking at income which may suggest the existence of undisclosed assets such as investments, property or significant foreign currency transactions.”

Under the seven-year rule, households are permitted to make certain gifts from tax as long as they live seven years after making them.

If someone dies before the seven years are up, the gifts will be included as part of their estate and IHT charged on a sliding scale if the value is greater than the £325,000 allowance.

Similar to its investigations into missing IHT bills, HMRC will also investigate if any suspicious gifts have been made.

An HMRC spokesperson told GB News: "More than 93 per cent of estates are forecast to have zero liability in the coming years – and the vast majority of liable estates pay the correct inheritance tax.

"Investigations are opened into cases where compliance issues have been detected to ensure that everyone pays the right amount of tax.”

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