HMRC officials have launched investigations (Image: Getty)
HMRC opened nearly 5,000 formal tax inheritance enquiries during 2025/26. This marks an 18% rise on the previous year with the tax, payments and customs authority checking bank statements for unreported gifts that could be liable for death duties.
Officials also check for property data that suggest an estate might have been undervalued. Meanwhile, nearly 5,000 further estates were referred for review prior to a formal investigation. Experts have now issued a warning to taxpayers, explaining how some people were caught out by the inheritance tax rules around giving gifts to friends and family.
It is legal to gift any amount of money or assets to another person in the UK. However, a gift can trigger Inheritance Tax (IHT) depending on your estate value, who you give it to, how much you give and when you pass away.
As reported by Birmingham Live, HMRC allows you to give tax-free gifts to your children through specific allowances: 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 classed as Potentially Exempt Transfers and are free of Inheritance Tax only if you live for seven years after giving them.
Nikita Cooper, of Price Bailey, the accountancy firm which obtained the figures, said: “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.”
David Wright, of the Association of Taxation Technicians, added: “HMRC have their data system Connect, which is a big spiderweb pulling data from lots of different places.”
Inheritance tax rules can be complicated in the UK (Image: Getty)
Fiona Fernie, a tax partner at Blick Rothenberg, continued: “They will be looking to see if somebody who has reported relatively modest income is flying to Mauritius and the Maldives three times a year for their holiday.”
Quastels, a legal advisory firm, said: “There are many reasons that explain the rise in HMRC enquiries, which we run through in this article.
“Among them are frozen inheritance tax thresholds, rising property values over time, cross-border complexities (and ignorance as to these complexities) and increasingly complex family wealth.
“While these factors become more common, HMRC has also invested significantly in compliance and is placing greater emphasis on identifying inaccurate or incomplete returns.
“It is important to add, however, that a higher number of investigations does not necessarily mean more people are deliberately avoiding tax. In fact, many enquiries arise because HMRC requires further information before it is satisfied that an estate has been valued correctly.
“As mentioned above and throughout this article, the stress and work triggered by such an enquiry (even where tax has been paid accurately) can be prevented in the first place.”