Taxman hunts down £1.36bn in unpaid inheritance tax
HM Revenue and Customs has uncovered £1.36 billion in unpaid inheritance tax as part of an intensified enforcement drive that saw formal enquiries jump 18% to reach 4,940 cases in 2025/26, the highest level in six years.
The substantial sum represents additional revenue being pursued by tax authorities as inheritance tax receipts hit approximately £8.5 billion in 2025/26, up from £8.2 billion the previous year and marking the fifth consecutive annual record.
Chancellor Rachel Reeves has announced plans to raise an extra £6.5 billion per year by the end of Parliament through HMRC modernisation and the recruitment of 5,000 compliance caseworkers and 1,800 debt collection officers, directly fuelling the increase in enforcement activity.
Frozen thresholds pull more families into tax net
The nil rate band for inheritance tax has remained frozen at £325,000 since April 2009 and is now confirmed to stay at that level until at least April 2031. This 22-year freeze creates fiscal drag that pulls increasing numbers of estates into the tax net as property values and other assets rise with inflation.
In 2022/23, inheritance tax was paid on 4.62% of deaths in the UK, affecting approximately 31,500 estates. The Office for Budget Responsibility forecasts that inheritance tax receipts could surge to more than £14 billion by the end of the decade.
Major policy changes loom
From April 2027, inherited pension pots will be brought within the scope of inheritance tax for the first time under the Finance Act 2026, significantly expanding the tax base.
Business and agricultural property relief has also been curtailed from April 2026. The 100% relief is now capped at £2.5 million of combined assets per person, with only 50% relief available above this threshold, effectively creating a 20% inheritance tax rate on excess assets.
Political pressures and historical proposals
Andy Burnham first proposed a 10% levy on all estates after death to fund social care in 2009 when he was Health Secretary under Gordon Brown. The plan was labelled a 'death tax' by opponents and subsequently abandoned, but renewed discussion of social care funding has revived concerns about similar proposals.
Enforcement burden and success rates
While HMRC has ramped up compliance activity, only 40% of formal inheritance tax enquiries in 2025/26 resulted in actual changes to tax returns, down from 45% in 2024/25. This means 60% of formal investigations impose administrative burden on families without ultimately finding errors.
Tax experts warn that the combination of frozen allowances, new taxes on pensions, reduced reliefs for business and agricultural property, and intensified enforcement creates mounting pressure on families navigating inheritance tax obligations.