HMRC Opened Nearly 5,000 Inheritance Tax Enquiries Last Year — Is Your Estate Ready?

Have you ever wondered what actually happens after your executor sends off the inheritance tax paperwork? Most people assume it gets filed away and forgotten. But according to figures obtained by the accountancy firm Price Bailey, HMRC opened 4,940 formal Inheritance Tax enquiries in the last tax year — an increase of 18% on the year before, and the highest number in six years.

By the end of this article, you'll know what HMRC is actually checking for, why more ordinary families are being drawn into this process than at any point in recent memory, and what makes an estate hold up without anyone having done anything wrong.

A wider net, not a witch hunt

Before picturing a crackdown on wrongdoing, it's worth sitting with the more honest part of the story. The proportion of enquiries that actually turn up extra tax is falling, not rising. Of the returns HMRC referred for a closer look last year, only 40% resulted in any change to the amount owed — down from 45% the year before, and a long way down from over 80% just a few years ago.

In other words, HMRC is opening more enquiries and finding, in a growing share of cases, that there was nothing wrong at all. Nikita Cooper, a director at Price Bailey, put it plainly: a formal enquiry can mean months of extra administrative work at a time of bereavement, even when it doesn't lead to a penny more tax being due.

Most families in this position are entirely fine. The point of this article isn't to alarm you — it's to explain why more families than ever are ending up in this process regardless, and what tends to make the difference between a smooth administration and a drawn-out one.

Why enquiries are rising

Two things are driving the increase. The first is practical: Inheritance Tax returns in the UK are still largely paper-based and processed by hand. HMRC doesn't yet have the digital tools to target enquiries precisely, which helps explain why the number of enquiries is climbing while the proportion that find anything is falling. HMRC is casting a wider net because it currently can't cast a more accurate one.

The second is structural. The Inheritance Tax nil-rate band has been frozen for years while property values have continued to rise, so estates that would never have been considered "wealthy" a decade ago are increasingly drifting into scope. Changes due from April 2027, bringing pensions within the scope of Inheritance Tax, will widen that pool further still.

What HMRC actually checks

It helps to know, in plain terms, what a formal enquiry is actually looking at. Broadly, it comes down to three things.

The value placed on the estate. This covers the family home, investments, and — often overlooked — personal effects and chattels, which HMRC specifically flags as an area where valuations are frequently too low or missing altogether. Where a business or agricultural interest is involved, valuation becomes more complex still.

Lifetime gifts. Gifts made in the seven years before death are generally brought back into account for Inheritance Tax purposes. One exemption in particular — for gifts made regularly out of surplus income, rather than capital — requires the executors to demonstrate, after the event, that the gifts were part of a regular pattern, made from income, and didn't affect the giver's standard of living. That's very hard to prove from memory. It's far easier when there's a written note made at the time, and a simple year-by-year record of income and gifts.

Reliefs and allowances claimed, particularly the transferable nil-rate band that can pass across from a late spouse or civil partner. Claiming it requires specific documents — a death certificate or grant of representation, a copy of the earlier will, any deed of variation — which are considerably easier to lay hands on now than they will be in fifteen or twenty years' time.

Mr and Mrs Smith

Take Mr and Mrs Smith, a couple in their early sixties. They made wills some years ago and haven't given them much thought since. If Mr Smith were to pass away tomorrow, would his executor know what gifts he'd made over the years, and why? Would anyone know where the paperwork sits for his late father's unused nil-rate band?

None of that is really a question about the will itself. It's a question about whether anyone is holding the whole picture — the will, the pension, the pattern of gifting, all of it — in a way that would actually stand up to a closer look. For most families, that picture has simply never been assembled in one place.

Why coordination matters more than the will alone

A will tells your executor who gets what. It doesn't, on its own, tell them what gifts you made, why an allowance transferred from an earlier death, or how a particular valuation was reached. That's the gap that turns a routine estate into months of extra work during an already difficult time — not because anyone did anything wrong, but because nobody had pulled the threads together while there was time to do it calmly.

This is really what estate planning means, properly done: not a single document in a drawer, but your will, your pension, your gifting, and your allowances working together and reviewed as your circumstances change, with someone holding the whole picture rather than each piece sitting in isolation.

This article is general information about UK estate planning and does not constitute legal or tax advice. Everyone's circumstances are unique — if you'd like to talk through yours, we'd love to help.

If you'd like to talk through your own situation, you can book a free, no-obligation 15-minute chat with Gary. No pressure, no jargon — just a friendly conversation to help you feel more informed.

Source: HMRC enquiries into IHT rise to highest level in 6 years, IFA Magazine, reporting data from Price Bailey.

See our YouTube video on this topic here: https://youtu.be/XPF_OLjIyKI