During the 2025-26 tax year, HM Revenue & Customs (HMRC) opened 4,940 formal inheritance tax investigations, marking an 18% increase compared to the previous year. In addition, almost 5,000 extra estates were referred to HMRC’s compliance team for preliminary review prior to any formal enquiry being initiated.
HMRC has ramped up its examination of bank statements to identify unreported gifts that could trigger inheritance tax liabilities. Property valuations are also closely scrutinised to detect potential undervaluation of estates. Tax experts emphasise that many taxpayers find the inheritance tax rules concerning gifts to friends and family complex, which can lead to inadvertent non-compliance.
Nikita Cooper of Price Bailey, the accountancy firm that provided the data, noted:
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“HMRC is coming under increasing pressure to clamp down on non-compliance and boost the tax take, and inheritance tax is becoming a higher priority. Many formal inquiries 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.”
Taxpayers are allowed to make certain tax-free gifts to their children, including an annual exemption of £3,000, small gifts up to £250 per person, and wedding gifts up to £5,000. Gifts exceeding these amounts are classified as Potentially Exempt Transfers and only exempt from inheritance tax if the donor survives for seven years following the gift.
David Wright from the Association of Taxation Technicians explained: “HMRC have their data system Connect, which is a big spiderweb pulling data from lots of different places.”
Fiona Fernie, tax partner at Blick Rothenberg, added: “The authorities will be looking out for inconsistencies, such as someone reporting relatively modest income but taking frequent luxury holidays abroad like trips to Mauritius and the Maldives.”
The legal advisory firm Quastels highlighted several factors contributing to the rise in HMRC enquiries: frozen inheritance tax thresholds, property value increases over time, cross-border complexities, and more intricate family wealth arrangements. They also stressed that HMRC’s significant investment in compliance efforts aims to ensure accurate estate valuations, rather than necessarily reflecting deliberate tax avoidance.
Quastels noted:
“It is important to add that a higher number of investigations does not necessarily mean more people are deliberately avoiding tax. Many enquiries arise because HMRC requires further information before it is satisfied that an estate has been valued correctly. The stress and workload triggered by such an enquiry, even where tax has been paid accurately, can often be prevented with careful planning and compliance from the outset.”