An inheritance tax (IHT) crackdown looms as HM Revenue and Customs (HMRC) has identified a £392million shortfall in revenues, new research claims.
Analysis from TWM Solicitors suggests the tax authority lost hundreds of millions to IHT underpayments during the year to March 31, 2026.
That figure represents a 14 per cent jump compared with the £344million recorded in the preceding 12-month period.
The sharp rise comes as a growing number of estates fall within the scope of IHT, while recent policy changes are expected to push tax liabilities higher for certain families in the years ahead.
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Against that backdrop, the tax authority is expected to maintain its intense focus on rooting out cases where the correct amount of inheritance tax has not been paid.
Duncan Mitchell-Innes, the deputy head of Private Client and Partner at TWM, outlined what is at stake when it comes to the Treasury’s coffers.
He said: “The IHT rules can be complicated and, for executors trying to complete the IHT return without professional help, there is scope for misunderstanding or not being aware of the rules, leading to an inadvertent underpayment of IHT.”
He cautioned that executors and personal representatives who are found to have underpaid face substantial interest charges and, in some cases, financial penalties.
The tax authority is allegedly losing millions to IHT underpayments
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HMRC / TWN SOLICITORS
Average Inheritance tax paid by region | ONS
Mr Mitchell-Innes noted: “HMRC’s increasingly sophisticated data analytics are making it easier for them to spot underpayment.”
Those advanced analytical tools allow the tax authority to cross-reference probate submissions against a wide range of other data sources, making discrepancies far harder to conceal.
Insured valuables such as jewellery, watches and artwork that do not appear in the probate submission are an immediate trigger, as are artworks assigned suspiciously low valuations.
The firm noted that bank records revealing transfers to overseas or cryptocurrency accounts that go unmentioned in the probate also raise alarm bells.
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Firms claiming Business Property Relief face scrutiny too, particularly where unusually large cash reserves sit on the balance sheet, suggesting funds may have been deliberately sheltered from IHT.
HMRC also checks whether assets flagged in the deceased’s self-assessment returns, such as rental properties or shareholdings generating dividend income, have been omitted from the estate.
Gifts made within seven years of death also attract attention, particularly where the deceased continued to benefit from a supposedly transferred asset.
Earlier TWM research revealed that referrals to the Valuation Office Agency climbed 23.5 per cent, from 11,845 to 14,631, in the year to September 2025.