HMRC has recovered an extra £1.36 billion from inheritance tax investigations over the past five years, while IHT receipts hit a record £8.5 billion. The proportion of UK deaths triggering an IHT bill is now the highest in almost twenty years.
The new battleground is property valuations. HMRC referrals to the District Valuer are up 23.5%, because under-valued homes are the easiest error to find. An estate agent’s appraisal is not a valuation — if inheritance tax is likely, get a written RICS valuation prepared at the date of death. A £40,000 under-valuation costs the estate £16,000 in tax, plus interest and possible penalties.
The other flashpoints: unrecorded gifts made in the seven years before death, Business Relief claims now that the combined cap is £2.5 million, and valuables written off as “contents”. Remember the executor signs the return and is personally liable for getting it wrong — even after the money has been distributed.
Three things to do while you can: value your estate properly, keep a one-page gift log, and check life policies are written in trust.