Making sure your loved ones are well provided for after you die is likely one of your main financial priorities.
That’s why it can be frustrating to think that your estate planning could be challenged by an HMRC investigation, which may result in additional tax being due.
A recent report found that inquiries into underpaid Inheritance Tax (IHT) have risen sharply over the past year. Even if your estate is fully compliant, the investigation can cause delays, frustration, and extra work for your family.
Read on to discover why IHT investigations are on the rise and what steps you can take to protect your estate from one.
Rising estate values have caused HMRC investigations to soar
A report in SAGA found that HMRC investigations into estates underpaying IHT rose by 41% in the 2024/25 tax year compared to the previous year.
This increase has been largely driven by rising estate values and the subsequent rise in IHT revenue, as HMRC now has a larger pool to investigate.
Data from Statista shows that IHT receipts have reached record levels in every year bar two since 2010/11, reaching around £8.25 billion in 2024/25. This trend is largely the result of frozen IHT thresholds combined with rising asset values, which have drawn more estates into the tax net.
And IHT revenue is only likely to rise further. Upcoming changes, such as including pensions within IHT and putting limits on certain reliefs, are expected to push revenues even higher, so careful estate planning is more important than ever.
You can read more about the upcoming changes to IHT in our previous article on the topic.
HMRC may investigate multiple places to find underpayment
HMRC usually launches an IHT investigation when there are unusual patterns, inconsistencies, or other warning signs in an estate.
Some of the most common triggers include:
- Large or complex estates – Estates with substantial assets, especially those that include foreign holdings or complex financial arrangements, are more likely to be reviewed.
- Undisclosed income – Any income not properly reported can raise questions.
- Undervaluing or failing to declare assets – Incorrect or omitted asset valuations are a common reason for an investigation.
- Errors or discrepancies on IHT forms – Inaccurate valuations, missing information about gifts, trusts, or other arrangements can prompt a review.
- Gifts or transfers made shortly before death – Transfers within seven years of passing, or multiple contributions into trusts, are often examined.
- Life insurance premiums – HMRC may check bank statements for policy payments, particularly if the policy isn’t held in trust, as it could be included in the estate for tax purposes.
- Use of reliefs – Claims for Business Relief, Agricultural Relief, or other exemptions can often attract attention.
In short, anything that is unusual, complex, high-value, or mistaken can trigger an investigation. Even if everything has been done correctly, complicated estate planning may still lead to HMRC taking a closer look.
Taking steps now can help ensure your estate isn’t investigated
Even if HMRC ultimately finds no extra tax is due, an investigation can still be stressful and time-consuming for your family.
Taking the following steps now can help reduce the likelihood of your estate being investigated:
- Keep clear documentation – Having well-organised records of gifts, transfers, and asset valuations throughout your life ensures transparency and can make it easier to see what is or isn’t subject to IHT.
- Make gifts early and avoid retaining control – If you want to provide financial support to your children or other beneficiaries, it’s best to do so sooner rather than later. Gifts given within seven years of death may still be considered for IHT, and any gifts you continue to benefit from, such as a home you’ve transferred but still live in, could also attract tax.
- Integrate estate planning into your long-term strategy – Sudden transfers of major assets or last-minute trust arrangements can raise questions. By incorporating estate planning into your overall financial plan early, you can make decisions that are tax-efficient and less likely to be scrutinised.
- Work with professionals – Solicitors, accountants, and financial planners can all help you ensure your estate remains compliant and isn’t investigated. They can also work together to make the process of planning and then distributing your estate as smooth as possible.
A financial planner can help you at every stage of an Inheritance Tax investigation
A financial planner can help you structure your estate to reduce the risk of an HMRC investigation while keeping your long-term legacy goals on track.
They can also model how your estate may evolve over time and recommend strategies that protect your beneficiaries without creating unnecessary complications.
If HMRC does open an investigation after your death, a financial planner can support your beneficiaries by ensuring the authorities have all the information they need.
Should the investigation result in an additional IHT charge, they can guide your beneficiaries on how to manage the payment efficiently and explore any available reliefs or planning options to minimise the impact.
To speak to a financial planner, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, or trusts.
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