HM Revenue & Customs (HMRC) has reported a substantial recovery of £246 million in underpaid inheritance tax (IHT) during the last financial year, highlighting a growing trend in tax enforcement. Investigations into IHT surged to 3,977 in the financial year ending April 2025, up from 3,793 the previous year, according to data analysed by TWM Solicitors. This sharp increase in investigative activity underscores the importance of accurate estate planning for landlords with property portfolios.

The new data reveals that HMRC is leveraging advanced data-matching tools, including AI systems, alongside Land Registry records and mapping data, to identify discrepancies in estate returns. This technological approach has significantly enhanced HMRC's capacity to detect underreported assets, as the tax authority seeks to ensure compliance within an increasingly complex regulatory framework.

Rising property values and frozen tax thresholds have played a critical role in pushing more estates into the IHT net. Since 2020, inheritance tax receipts have increased by over 61 percent, reaching £8.3 billion. The IHT nil-rate band has remained at £325,000 since April 2009, a period during which property and asset values have surged. As a result, many families that once fell below the threshold are now finding themselves liable for IHT, even those with relatively modest homes.

The financial impact of this trend is significant. Penalties for underpayment can amount to tens of thousands of pounds, raising the stakes for landlords who may be unaware of their potential tax liabilities. David Lunn, a partner in the private client team at TWM Solicitors, noted that “HMRC’s investigations are becoming increasingly complex, particularly when it comes to residential property.” He advises that obtaining proper legal and financial advice is essential for landlords navigating these evolving tax obligations.

The increasing scrutiny from HMRC serves as a stark reminder that estate planning is no longer an optional exercise for landlords with property holdings. With the tax net widening and penalties becoming more severe, landlords must proactively manage their estate valuations and ensure compliance with IHT regulations.

The background to this heightened enforcement can be traced to a series of budgetary measures aimed at increasing tax revenues. As the government grapples with fiscal challenges, the focus on IHT enforcement has intensified, leaving landlords with little room for complacency. An HMRC spokesperson reaffirmed that while most individuals pay the correct amount of inheritance tax, investigations are necessary to address cases where discrepancies are suspected.

Given the complexities involved, landlords are encouraged to reassess their estate planning strategies. This includes not only ensuring accurate property valuations but also understanding the legal frameworks surrounding IHT. With property values fluctuating and thresholds remaining static, the risk of falling into the IHT bracket is ever-present.