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A Freedom of Information request has revealed that since April 2022, 14,000 families have been suspected of underpaying Inheritance Tax (IHT).
In the 2025/26 tax year alone, HMRC has opened more than 3,000 probes into potential underpaid IHT, a sharp rise compared to previous years. [1]
After you pass away, the executor of your estate is responsible for having it valued accurately and arranging payment of IHT due. If they make mistakes, they could face an investigation from HMRC. If you are named as the executor for a family member or close friend, you could face the same responsibility in the coming years.
A significant portion of your estate will likely be subject to Inheritance Tax
For most estates, IHT is due on any wealth that surpasses the nil-rate bands.
Until 2031, these are frozen at:
- £325,000 – The main nil-rate band that applies to everyone.
- £175,000 – The residence nil-rate band, which applies to those leaving their main home to a direct descendant. If your estate is worth more than £2 million, the residence nil-rate band tapers down, disappearing completely at £2.35 million or £2.7 million for a couple.
Spouses and civil partners are exempt from IHT, but if you leave your estate to any other beneficiaries, the assets will very likely be subject to IHT. The main rate is 40%, but some assets can benefit from reliefs, including some business holdings, agricultural holdings, and assets in trust.
Therefore, after you die, your assets will need to be valued, including but not exclusive to:
- Properties
- Shares
- Businesses
- Cash
- Artwork
- Cars
- Pensions (currently exempt, but from April 2027, these are set to be included in IHT calculations).
Your executor is responsible for arranging the valuations. This is a weighty task – they will need to contact your pension provider(s), banks and building societies, business partner, spouse, and other key people and institutions to ensure all bases are covered in a timely manner.
However, this doesn’t mean that the donor of the estate is exempt from responsibility. In fact, there are ways to ensure your estate is in order before you pass away, potentially helping to avoid such an investigation.
Read more: Everything you need to know if you’re named the executor of an estate
3 common mistakes that lead to Inheritance Tax investigations
1. Undervalued properties
Property values fluctuate over time. While they have trended up over the long term, short-term market shifts and the ongoing condition of the property mean its value can change quickly.
If your executor uses an outdated valuation (such as one that predates your death), or only has the property valued by one expert rather than garnering the opinion of several, this could lead the property to be undervalued in the eyes of HMRC.
As an example, if your executor declares that a property is worth £800,000 for IHT purposes, but the same property sells soon after for more than £1 million (without having undergone any repairs or extensions, and without this reflecting a market upswing), this may trigger an investigation.
2. Taxable lifetime gifts
Gifts made during your lifetime are not automatically IHT-free.
In fact, if a gift meets the following criteria, it could be subject to IHT if you pass away within seven years after giving it:
- The gift is worth more than £3,000.
- It is made from capital assets, not surplus income.
- The gift was not made within a trust.
For instance, if you gave your child £60,000 to assist with a deposit on their first home and passed away two years afterwards, this gift may be considered a failed potentially exempt transfer (PET) and a portion of it could be subject to IHT.
If PETs are not declared in IHT calculations, HMRC could investigate them and apply an additional tax charge.
3. Undisclosed assets
If you have a complex estate with many assets, including those held overseas or non-traditional assets such as digital currency, your executor may make an error when valuing your estate and exclude an asset altogether.
The result of an Inheritance Tax investigation depends on HMRC’s findings
If HMRC opens a probe into your estate, or an estate of which you are an executor, their findings will dictate any sanctions imposed. [2]
As of the 2025/26 tax year, HMRC assesses:
- Whether the mistake was disclosed to HMRC after being prompted, or if the executor realised the error and notified HMRC themselves
- If the incorrect disclosure was “careless” or “deliberate”
- The quality of the records produced
- The level of cooperation from the executor and others involved
- Whether the executor made efforts to conceal the inaccuracy or not.
Once HMRC reaches a conclusion, it can apply the following penalties:
- Paying the IHT shortfall with interest
- An additional fine
- In serious cases, prosecution.
We can help you manage your estate and leave a lasting legacy
Managing a large and complicated estate without sufficient professional support could increase your stress as you get older – and, crucially, may lead to errors that your executor and wider family must deal with later.
Our Wealth Planning team can help you, your family, and your executor at all stages of estate planning and after your death.
Contact your Relationship Manager to learn more – or if you do not already work with us, email info@ipscap.com for more information.
Please note
Please do not act based on anything you might read in this article.
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate tax planning or estate planning.
IPS Capital does not provide tax or legal advice.
Sources
[1] 24.02.2026 Inheritance Tax investigations chase 14,000 bereaved families for underpayment MoneyWeek
[2] 11.03.2026 Compliance Handbook HMRC
