Register to get free articles
Want unlimited access? View Plans
Already have an account? Sign in
HMRC inheritance tax enquiries have hit a six-year high following an 18% surge in formal investigations, figures obtained by Price Bailey show.
A formal enquiry will be opened by HMRC if it believes there is a risk that an IHT return may be incomplete or inaccurate, a process that grants HMRC the power to request documents, valuations, correspondence and explanations from executors or advisers, posing a difficult process for families who are administering an estate.
HMRC’s risk assessors also referred 4,965 IHT returns to the compliance team in 2025/26, the highest number in five years. This is a pre-emptive evaluation, as opposed to a formal enquiry. Referrals to the compliance team can lead to either no action, a minor amendment, or a formal enquiry.
According to the firm, the proportion of IHT returns referred to the compliance team resulting in amendments has continued to fall, with just 40% of compliance checks leading to an amendment in 2025/26, down from 45% the previous year. Price Bailey noted that amendment rates are significantly lower than those seen during the pandemic, suggesting HMRC is investigating more cases, but finding fewer problems.
Nikita Cooper, director at Price Bailey, said: “HMRC is coming under increasing pressure to clamp down on non‑compliance and boost the tax take. IHT was historically a very small component of HMRC’s overall revenues, but many more estates are being caught in the tax net every year, so it is becoming a higher priority for HMRC.”
“For taxpayers, a formal enquiry can mean months of additional work at a time of bereavement. The process can entail providing detailed evidence of asset values, lifetime gifts and relief claims. Crucially, many formal enquiries do not lead to any additional tax, but they still impose a significant administrative and emotional burden on families who have already complied with the rules.”
Price Bailey added that, unlike most other taxes, IHT returns must still be submitted on paper and processed manually. Only limited data from these forms is digitised, and HMRC does not hold the information in a format that supports modern analytics or AI-driven risk modelling, restricting its ability to target enquiries effectively, helping to explain why the strike rate has fallen despite formal enquiries rising.
Cooper said: “We are likely to see much greater emphasis on compliance as the number of estates eligible for inheritance tax and the amount collected rises sharply in the coming years. The current paper‑based filing system is already buckling under the strain and HMRC will need to get much better at sifting out inaccurate returns from those who are doing the right thing.”
