£1.4bn in unpaid IHT recovered in last five years

HMRC has recovered an estimated £1.39bn in unpaid inheritance tax (IHT) during the past five years, according to new figures obtained by NFU Mutual.

The financial advice firm suggested that collections in the last financial year have also climbed by 14% on 2023 levels.

Since 2019, HMRC has launched investigations into the estates of over 19,800 deceased individuals where underpayment of IHT has been suspected.

The amount of IHT recovered following investigations increased to £285m in 2023/24, up from £251m in the previous year, and comes at a time when the total amount of IHT collected reached a new annual high of £7.5bn.

In cases where there is suspicion that IHT has been underpaid through error, omission or undervaluing assets, HMRC has substantial investigate powers and will check a range of sources to build a picture of the deceased individual’s financial affairs.

Chartered financial planner at NFU Mutual, Sean McCann, said that this could include analysing bank statements to identify income which may suggest the existence of undisclosed assets such as investments or property or significant foreign currency transactions.

“HMRC leaves no stone unturned in these investigations,” McCann said. “For example, they will look at outgoings such as gifts made in the seven years before death, or premiums for life insurance policies which if not written in trust will form part of the taxable estate.

“In addition, the interest rate you pay on overdue inheritance tax stands at 7.75%, which is the highest rate for 30 years, and can add a significant amount to the bill. This can compound what for many is already a challenging and distressing situation.

“With the £325,000 nil-rate band and the £175,000 residence nil-rate band frozen until 2028, more families will be caught in the inheritance tax net with ever increasing bills for those affected.”

The figures also revealed that while the sums collected from IHT investigations is increasing, the number of new cases opened is declining, reducing by 46% compared to 2019.

However, McCann said that this doesn’t mean a change in tack from the authorities.

“Investigations can take months and occasionally years to complete, and therefore the £285m recovered in 2023/24 may be from enquiries opened in earlier years,” he added. “The lower number of investigations seems to suggest that they are becoming more targeted and forensic in nature.

“The revenue recovered through these investigations is significant and the rising value of assets and the potential sums at stake would appear to justify HMRC spending time looking at individual cases.

“IHT remains one of the most feared and least understood taxes, which many parties will likely seek to address in their manifestos as we head towards the General Election on 4 July.”

Share Story:

Recent Stories

Helping landlords make their cash work harder
MoneyAge Editor, Adam Cadle, talks to Family Building Society BDMs, Arif Kara and Nathan Waller, about the resilient BTL market, the wide variety of landlords that Family Building Society caters for, and how niche products like an Offset mortgage can help improve cashflow.

An outlook on the BTL market
MoneyAge Editor, Adam Cadle, talks to Landbay senior regional account manager, Alex Witham, about current market sentiment within the BTL space and Landbay’s success in this area

Empowering advisers: A decade of education in Later Life Lending with Air Academy
Michael Griffiths is joined by chairman of Air Club and former founder and CEO of Air, Stuart Wilson, and head of the Air Academy, Daniel Holden, to look back on a decade of business focused learning at the Air Academy.


Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.