Since 2021, HMRC has clawed back £1.36 billion from families found to have underpaid Inheritance Tax (IHT). [1]
 
During 2025/26, the tax office launched almost 5,000 IHT investigations, while a similar number were referred to HMRC’s compliance team to assess whether further investigation was needed. [2]
 
HMRC has far-reaching powers

Coming under HMRC scrutiny at any time can be stressful, but when it focuses on the estate of a loved one, dealing with the fallout could be doubly hard. 
Apart from entailing a lot of time-consuming paperwork, an investigation could also result in unexpected tax charges, interest payments, or even penalties for your beneficiaries.

What could trigger an HMRC investigation?

HMRC may investigate if it suspects assets have been undervalued or believes there have been errors or omissions.

Activities that could arouse suspicion include:

• Large or unusual lifetime gifts, especially those given within seven years of a death
• Life insurance claims, if policies aren’t written in trust, payouts could form part of the taxable estate
• Undervalued property or other assets, especially where HMRC believes the open-market value could be materially higher.

Inheritance Tax receipts reached a record of nearly £8.5 billion in 2025/26

Although government records suggest fewer than 5% of estates pay IHT, £8.5 billion is a substantial figure and is only set to increase once unused pensions become subject to the tax in April 2027. [3]
 
Not only will pensions influence the figures, but there’s also speculation that Andy Burnham has plans to overhaul how estates are taxed.
 
Prior to becoming prime minister, he spoke of introducing a flat 10% on all estates to help fund social care.

As a reminder, the standard rate of IHT is 40% (2026/27) and only applies to assets that exceed:

• The £325,000 tax-free allowance
• The residence nil-rate band of £175,000.

Download: Your Inheritance Tax & Estate Planning Guide

3 tips to help protect your estate (and executors) from HMRC scrutiny

1. Give gifts with no strings attached

When gifting during your lifetime, you must ensure you don’t continue to benefit from whatever you’re giving to someone else.
 
If you trip up, whatever you gifted may become subject to IHT. So, be cautious not to:

• Gift your home to children and continue to live in it rent-free or at a knockdown price
• Pass ownership of a valuable belonging and keep it in your possession – a painting that remains hanging on your wall, for example
• Continue to receive income from an investment.

To put it bluntly, if your aim is to make tax-efficient gifts, make sure you’re no longer benefiting from whatever you give away!

2. Keep meticulous records

Keeping an accurate record of all the gifts you make can help you stay organised and ensure your executors have what they need when dealing with your estate.
Whether you jot the details in a notebook or record them on a spreadsheet, be sure to note down:

• Who you gave the gift to
• The date you made the gift
• How much you gifted.

If you’ve started gifting your wealth and haven’t recorded the details, spending time to note these points now could save your beneficiaries from a distressing HMRC investigation later.

When gifting from income on a regular basis, it’s even more important to maintain careful records and receipts of payment, as you need proof that payments were regular and didn’t impact your own standard of living.

3. Plan ahead and, if in doubt, ask your financial planner
 
With multiple “gotchas” waiting to catch you out, early planning is key if you want to leave as much wealth as possible to your beneficiaries.

Your Titan Wealth Planner can help you create an estate plan to mitigate IHT and ensure a gifting strategy that works – for you, your heirs, and HMRC.

If you’d like to learn more about how we could help ensure your hard-earned wealth benefits the next generation – and beyond – please get in touch.

Email info.wp@titanwh.com or call us on 0800 048 0150.

Please note
This article is for information purposes only and does not constitute personal financial advice. If you are unsure about whether a particular course of action is suitable for you, we recommend that you seek independent financial advice.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of investments and the income from them can fall as well as rise, and you may get back less than you originally invested. Past performance is not a reliable indicator of future performance. Tax treatment depends on individual circumstances and may be subject to change in the future. Tax and estate planning outcomes are not guaranteed.

The Financial Conduct Authority does not regulate estate planning.

Titan Wealth Planning Ltd is authorised and regulated by the Financial Conduct Authority (FCA reference number: 574458). Registered address: 101 Wigmore Street, London, W1U 1QU, United Kingdom.