AN HMRC inheritance tax crackdown has seen inheritance tax, or IHT, penalties rise by a third.
Bereaved families have been forced to fork out £3m in fines to HMRC and the Labour Party government’s tax arm. HMRC has slapped the executors of 5,200 estates with late-filing penalties totalling £3.1m in 2024-25, averaging £596 per case, according to data released under Freedom of Information rules. Penalties for failing to submit an inheritance tax return on time start at £100 and rise to £3,000 after one year, reports Birmingham Live.
Rachael Griffin, of wealth manager Quilter, said delays in form-filling were “inevitable” and added: “As more modest estates are caught, there is a greater tendency to try and handle returns without advice.
“That creates predictable friction as many executors are navigating this for the first time, running up against a process that is evidence-heavy, deadline-driven and not particularly intuitive. Delays are an almost inevitable outcome, and penalties follow.
“There is a clear risk [that the number of penalties] intensifies from April. Pension death benefits will move more squarely into the inheritance tax regime, expanding both the number of estates in scope and the complexity of administering them.”
Duncan Mitchell-Innes, of law firm TWM Solicitors, said: “The basic inheritance tax form (IHT400) has 122 questions, often requiring detailed financial and historical information.
“In many cases, this must be supplemented by additional schedules – of which there are more than 30 – depending on the nature of the estate.”
HMRC dismissed claims that penalties would become more widespread from next year as “simply not true”.
A spokesman said: “The reality is we reduced reporting requirements during this period for most non-taxpaying estates.
“We’re constantly looking at ways to simplify returns, and the Government is investing £52m to simplify and digitalise our inheritance tax service to make the process quicker and easier.”