Families paid out £326 million in inheritance tax (IHT) last year after HM Revenue & Customs stepped up a crackdown on underpayments.
Investigators in the special IHT unit raised 28 per cent more in the 2021-22 tax year than in the year before, according to the financial advice firm NFU Mutual, which put in a Freedom of Information request to the tax office. The total paid in inheritance tax in 2021-22 was £6.1 billion, up £729 million from £5.4 billion the year before.
You can pass on £325,000 of assets tax-free when you die without your estate incurring IHT — £500,000 if you are passing on your main residence to a direct relative. Anything left to a spouse or civil partner is IHT-free and they can also inherit any unused allowances, so a couple can typically pass on £1 million to close relatives IHT-free.
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Because the £325,000 threshold has not increased since 2009 and property prices have soared, the amount paid in IHT is also leaping. The threshold will not go up until at least 2028. HMRC launched 4,258 investigations in 2021/22 to recover unpaid tax from bereaved families.
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“More inheritance tax is being recovered from tax investigations due to the rising value of assets, which justifies HMRC spending more time looking at individual cases,” said Sean McCann, a chartered financial planner at NFU Mutual.
If HMRC believes tax is owed, it can analyse bank statements, foreign currency transactions and outgoings such as gifts made in the years before someone’s death. HMRC will add 6 per cent interest to the bill if an estate has not paid the tax due within six months.
The wealth manager AJ Bell said that one in 25 estates are liable for IHT, but this was likely to rise while thresholds were frozen.
