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Protecting your estate: Inheritance Tax investigations increase by 41 per cent as more individuals face a bill

The number of Inheritance Tax (IHT) investigations have increased by 41 per cent in the tax year 2024/25 according to figures obtained in a freedom of information request by NFU Mutual.

2,807 investigations were opened during the 2023/24 tax year but that sharply increased to 3,961 as HM Revenue and Customs (HMRC) attempt to clarify if the right amount of IHT has been paid by families upon receiving their entitlements in an estate.

The rise in the number of investigations likely coincides with the continued freeze on IHT nil-rate bands which is pushing estates beyond the £325,000.

As the Government continues to target IHT, figures are expected to continuing increasing with further changes proposed to IHT coming into effect in the near future.

It is very important you keep on top of IHT changes and ensure your estate reflects the changes to ensure you don’t face an IHT bill.

What are the numbers behind the rise Inheritance Tax?

The numbers behind a 41 per cent rise in HMRC investigations highlight the continued strain the frozen IHT thresholds are having.

Frozen since the 2020/21 tax year, this has increased the liability of many estates. 31,500 estates were liable for an IHT bill, a 13 per cent increase since 2020/21 with more than 3,700 estates pushing beyond the threshold.

2022/23 figures released by the Government show 4.62 per cent of deaths in the UK resulted in their estate being liable for an IHT bill. This was small increase from the previous tax year.

The number of estates becoming liable is increasing and HMRC are collecting record figures. During the 2022/23 tax year, it collected an estimated £6.7 billion and that figure is expected to continue climbing.

The figures highlight the growing numbers behind IHT as estates surpass the threshold as the continued freeze on IHT increases liability.

Are further Inheritance Tax changes coming that could affect my estate?

The Government are continuing to propose significant changes that could have a detrimental effect on your estate, most notably the extended freeze on the IHT threshold rates and reliefs until 2030.

This would mean the current IHT rates would stay the same for the next five years, having been in place since the 2020/21 tax year.

Chancellor Rachel Reeves announced an extended freeze during last year’s Autumn Budget, the main nil-rate band figure will stay at £325,000 and so will the residence nil-rate band.

The Government have also proposed that from April 2027, unused pension pots and death benefits will be classed as part of an individual’s estate. This proposal again will impact estates.

By including unused pension pots within an estate increases the value, pushing them closer or over the IHT threshold. Because the unused pension pots and death benefits have value, adding this to your estate increases your chances of passing the £325,000 IHT nil-rate band.

Should this happen, your estate will be liable to pay an IHT bill. The proposed changes will impact future IHT figures, the number of investigations from HMRC are already increasing and introducing further measures will impact this further.

How can I take measures to protect my estate?

Figures are steadily rising, and it could soon impact your estate. With current IHT rates staying frozen and further plans on the horizon, its important you plan your estate accordingly and protect as much of that as possible.

You need to speak with Wills and Probate experts who can advise and support you. If you are in the process of putting your affairs in order or want to update your estate to reflect change, experts in the industry can help and guide you every step of the way.

With figures increasing, protecting your estate could be the difference between staying below the threshold and facing an unwanted IHT bill.

Get in touch today with our team for tailored advice and support.