HMRC Inheritance Tax Probes | What They Mean for UK Families?

June 11, 2025

9 minute read

Table of Contents

For many families in the UK, the grief of losing a loved one is compounded by a growing and unexpected concern: an official letter from HMRC launching an inheritance tax investigation. Over the last few years, the number of such probes has surged.

Thousands of estates are now under scrutiny as HM Revenue & Customs intensifies its efforts to ensure inheritance tax (IHT) is being paid correctly.

This has left many families feeling targeted during one of the most emotionally and financially vulnerable moments of their lives.

What once may have seemed like a straightforward inheritance process is now becoming a legal and financial ordeal for some. With house prices increasing and tax thresholds remaining frozen, more families are being dragged into the tax net without even realising it.

So, what exactly is happening? Why is HMRC focusing so much on inheritance tax, and how can families better prepare? This blog takes a deep dive into the HMRC inheritance tax probes that are shaking up estate management across the UK.

What Is an HMRC Inheritance Tax Probe?

An HMRC inheritance tax probe is a formal investigation launched by HM Revenue & Customs into an individual’s estate following their death.

The aim of the probe is to verify whether the correct amount of inheritance tax has been paid or declared during the probate process.

Inheritance tax is levied at 40% on estates that exceed the current threshold of £325,000, although allowances like the residence nil-rate band can extend this limit.

When executors or administrators submit inheritance tax returns, they must include full details of the deceased’s assets, liabilities, gifts, and any relevant exemptions.

Why HMRC Might Start a Probe?

Probes typically occur when HMRC suspects that something doesn’t add up in the tax return. This could include:

Undervalued property or other assets
Gifts made within seven years before death that were not reported
Use of complex trusts or offshore accounts
Omission of investments or bank accounts

An IHT investigation is more than just a formality. It can involve months of back-and-forth communication with HMRC, requests for detailed documentation, professional valuation disputes, and even penalties for underpayment if wrongdoing is confirmed.

In some cases, these investigations are triggered automatically based on algorithms or red flags in the data. Other times, they may arise from tips or inconsistencies spotted by probate professionals.

Why Are Inheritance Tax Investigations Increasing?

In recent years, there has been a dramatic increase in the number of inheritance tax investigations conducted by HMRC.

According to the latest data obtained through Freedom of Information requests, 4,171 formal probes were launched in the most recent tax year, marking a rise from 3,028 the previous year. That’s an increase of over 37 percent in just 12 months.

Reasons for the Surge

Several key factors are driving this escalation:

Frozen tax thresholds: The £325,000 IHT threshold hasn’t changed for over a decade. As inflation and house prices rise, more estates exceed this threshold and become taxable.
Government revenue pressure: With increasing national debt and public spending, the government is under pressure to recover taxes wherever possible.
Improved digital tools: HMRC now uses sophisticated data analysis tools to spot discrepancies in asset reporting, making it easier to flag questionable estates.
Increased scrutiny on avoidance: There’s a renewed focus on wealthy individuals who might be using tax avoidance schemes, trusts, or offshore accounts to shelter assets.

While the tax authority argues that these efforts help maintain fairness in the system, many families argue that they are being unfairly targeted due to unclear rules and valuation complexities.

HMRC Inheritance Tax Probes – Latest Update

The latest figures reveal a substantial intensification in HMRC’s efforts to recoup unpaid inheritance tax. In the past three years alone, HMRC has launched nearly 10,000 inheritance tax investigations. Of these, 2,606 are still unresolved, leaving thousands of families in a stressful limbo.

Record Revenues and Public Concerns

Last year, HMRC collected a record £8.2 billion from inheritance tax, marking the fourth consecutive year of rising IHT receipts. The reasons behind this are twofold:

A growing number of estates now fall above the taxable threshold due to rising property values
Probes and investigations are uncovering more unpaid tax and undervaluation cases

This record collection has triggered debates about fairness, particularly when grieving families are caught off-guard by retrospective tax bills, penalties, and drawn-out bureaucratic procedures.

How Does HMRC Identify Estates for Investigation?

When it comes to deciding which estates to investigate, HMRC uses a variety of tools and triggers. In many cases, estates are automatically flagged through algorithms that detect unusual patterns or missing data.

Common Triggers for HMRC Probes

Discrepancies in property valuations: A home listed well below the market value can raise suspicion
Undeclared gifts: Gifts made within seven years of death that are not included on IHT returns
Use of trusts or offshore investments: These structures often require more transparency and can appear evasive
Omissions in income or assets: Leaving out pensions, shares, or savings can lead to a deeper inquiry

The introduction of digital records, access to Land Registry data, and cross-referencing with financial institutions gives HMRC a broader scope to identify inconsistencies.

What Happens During an HMRC Investigation?

An inheritance tax investigation typically begins with a formal letter from HMRC to the executor or administrator of the estate. This letter will detail the reasons for the inquiry and request additional information.

Steps in the Investigation Process

Initial contact and queries: HMRC outlines its concerns and asks for clarification or documentation
Valuation checks: Professional valuations may be required, especially for property and businesses
Gifts and financial history: Executors may be asked to disclose gifts, bank transfers, and loan agreements
Consultation with professionals: Accountants or tax advisers often get involved to help navigate the process
Final determination: HMRC may accept the explanations or propose adjustments, including additional tax and penalties

These investigations can take several months and, in complex cases, more than a year. Families often find the process draining, especially when dealing with grief and probate at the same time.

Can Families Challenge HMRC’s Findings?

Yes, families do have the right to challenge HMRC’s conclusions. If the estate representatives believe the findings are inaccurate or unfair, they can request a review or formally appeal the decision.

Options for Dispute Resolution

Requesting a statutory review: This is a formal process where a different HMRC officer reviews the case
Filing an appeal: Families can appeal to the Tax Tribunal if they’re unhappy with the review outcome
Providing further evidence: In many cases, submitting additional documentation can resolve disputes
Engaging tax professionals: Expert legal and financial advice can significantly improve the chance of a successful challenge

However, it’s important to act quickly and respond within HMRC’s stated time limits to keep options open.

Impact on Grieving Families

Perhaps the most criticised aspect of these inheritance tax probes is the emotional toll they take on grieving families. Many people feel overwhelmed by the complexity of tax laws, legal paperwork, and financial pressures that come just after losing a loved one.

Emotional and Practical Challenges

Unexpected bills and penalties: Families are often shocked by additional tax demands they didn’t budget for
Time-consuming process: Investigations can delay inheritance distribution and cause family disagreements
Emotional strain: Dealing with HMRC at a time of grief adds psychological stress to an already difficult situation
Lack of guidance: Many feel HMRC provides little clarity or assistance, leaving families confused and vulnerable

Calls for reform are growing, with campaigners urging the government to introduce more compassionate and clear guidelines for inheritance tax enforcement.

What Can Executors and Families Do to Prepare?

Preparation is key when it comes to inheritance tax. Executors and families can avoid costly investigations by taking a few precautionary steps during the probate process.

Practical Steps to Avoid Problems

Keep detailed records of all assets, liabilities, and gifts
Obtain professional property valuations from qualified surveyors
Disclose all financial accounts, pensions, and investments accurately
Consult with tax professionals or solicitors during the estate planning process
Submit inheritance tax forms within deadlines and ensure they are complete

These steps help build a clear, compliant picture of the estate that reduces the chances of a formal HMRC inquiry.

Are Certain Assets More Likely to Trigger a Probe?

Yes, some types of assets tend to attract more scrutiny from HMRC due to their complexity or common undervaluation.

High-Risk Assets That Get HMRC’s Attention

Residential properties: Especially if they’re significantly undervalued compared to market prices
Gifts within seven years: Particularly those not supported by documentation
Business assets: Including shares, partnerships, and self-employed income
Offshore investments: These often require full declarations under UK tax law
Trust-held assets: These must be carefully reported to avoid suspicion

Families should ensure these are valued professionally and reported fully to minimise audit risks.

How Much Revenue Has HMRC Collected from These Probes?

In the latest financial year, HMRC has raised a record-breaking £8.2 billion in inheritance tax. This is a significant increase and reflects not only the rising value of estates but also the impact of intensified probe activity.

Year-on-Year Growth of IHT Receipts

Year	IHT Collected	Investigations Opened
2022	£6.1 billion	3,028
2023	£7.1 billion	3,961
2024	£8.2 billion	4,171

This rising trend confirms that inheritance tax is becoming a key source of government revenue, even as public sentiment questions the fairness of these policies.

What Are the Consequences of Underpayment?

Failing to pay the correct amount of inheritance tax can have serious consequences for families and executors.

Legal and Financial Penalties

Interest on unpaid tax: HMRC can charge interest from the due date
Fixed and percentage-based penalties: Depending on the severity and whether the error was deliberate
Delays in closing the estate: Probes can put asset distribution on hold
Possible legal action: In rare cases, deliberate fraud may result in prosecution

These consequences highlight the importance of accuracy and transparency when managing a deceased person’s estate.

Conclusion

The growing number of HMRC inheritance tax probes is a wake-up call for families across the UK. With more estates falling under scrutiny and the inheritance tax threshold unchanged for years, even middle-income households are finding themselves on HMRC’s radar.

Being proactive, transparent, and well-advised is more important than ever. Families must not wait until they receive an inquiry to start preparing their estate affairs.

Whether it’s through clear record-keeping, professional valuations, or timely tax advice, there are ways to stay ahead of an investigation and reduce the emotional and financial toll that often comes with it.