Inheritance Tax investigations increase: Have you protected your estate?

Inheritance Tax (IHT) investigations are on the rise, increasing by a staggering 41 per cent in the tax year 2024/25.

In figures obtained in a freedom of information request by NFU Mutual, 3,961 IHT investigations were opened by HM Revenue and Customs (HMRC), an increase from 2,807 in the previous year.

With HMRC committed to tackling issues like tax avoidance and tax evasion, you need to be prepared for any potential investigation.

What did the report highlight?

While the increased number of investigations isn’t necessarily a surprise due to the ever-changing rules surrounding IHT, a 41 per cent rise will raise eyebrows.

The report highlights that 31,500 estates were liable for an IHT bill in the 2024/25 tax year.

A steady increase of 13 per cent compared to 2020/21, with more than 3,700 estates pushing beyond the current thresholds.

In addition to this, HMRC has confirmed a record total of IHT was collected during the 2022/23 tax year.

Officials say an estimated £6.7 billion was collected during that period, and given the current and future changes to IHT, expect that figure to climb.

What is a likely factor behind the rise in investigations?

An increased number of HMRC investigations reflects the current IHT legislation in place and recent Government announcements to further reform this area of taxation.

The continued freeze on the IHT nil-rate will certainly be playing its part. Currently fixed at £325,000 for the main nil-rate band, this threshold will remain in place until at least 2030.

This means the current nil-band rate will have stayed the same since the 2020/21 tax year, despite record periods of inflation in the intervening years.

As a result, it is expected that the investigations will climb further, as the other IHT changes are introduced, such as the inclusion of unused pension pots as part of an individual’s estate value from 2027 and the changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).

The inclusion of unused pension pots will push many more estates closer to or beyond the IHT nil-rate band, increasing the potential for IHT liabilities.

With the Autumn Budget just around the corner, the Chancellor Rachel Reeves has the unenviable task of balancing the Government’s books while kickstarting economic growth.

IHT has proven a fruitful path thus far, so further IHT changes cannot be ruled out, which is why you must proactively assess any changes to protect your own estate.

How our expert team can help with tax investigations

With IHT investigations on an upward trajectory, you must keep on top of change and analyse your plan should further IHT reform come.

With the current IHT nil-band rate staying frozen and new IHT regulations to follow, taking a proactive approach will help you make the right decisions.

Our expert team specialises in tax investigations, helping individuals and businesses prepare for any potential tax investigations.

You can tap into decades of knowledge and experience with our team advising you on tax legislation, compliance issues and HMRC procedures.

We handle all types of tax enquiries and can help you manage tax risks and even negotiate with HMRC on your behalf.

So, if you are concerned about tax and any potential investigation, our team are here to give you all the tools you need to manage tax confidently.

Don’t let Tax concerns get the better of you, contact our team for expert advice and support.