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Taxman unearths £1.36bn in unpaid inheritance tax – as fears of new ‘death tax’ loom
HMRC has recovered an extra £1.36billion over the past five years by investigating estates suspected of underpaying inheritance tax, according to figures obtained by NFU Mutual via a Freedom of Information request. The disclosure comes amid growing anxiety about a potential new "death tax", after speculation that new Prime Minister Andy Burnham could pursue a 10 per cent levy on all estates to help fund social care, on top of a record £8.5billion collected in standard inheritance tax last year.
Investigations recovered £247million in 2024-25 alone, down 13 per cent on the previous year, though experts caution this reflects the lengthy nature of such probes rather than reduced HMRC scrutiny. Individuals become liable for inheritance tax above £325,000 (or £650,000 for married couples), rising to £500,000 and £1million respectively when a home is left to direct descendants; HMRC examines bank statements, insurance records and gifting history to uncover undisclosed assets. The tax net is also set to widen from April 2027, when pensions become subject to inheritance tax for the first time.
In short
- HMRC recovered £1.36bn via inheritance tax investigations over five years
- Fears grow of new 10% "death tax" under PM Andy Burnham
- Pensions will be drawn into inheritance tax from April 2027
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters of stronger inheritance-tax enforcement argue that estates should pay what the law requires, and that investigating suspected underpayment protects fairness between taxpayers and raises revenue for public services. They may also see a broader levy, including on inherited pension wealth, as a way to share the costs of social care across society rather than leave them to families and general taxation.
The case against
Critics argue that inheritance tax can burden families who have already paid tax on their income and assets, and that widening it to pensions or adding a levy on all estates could make planning and passing on a home or savings harder. They may also question whether a broad new charge is fair when estates differ greatly in wealth and ability to pay, and warn that uncertainty about future rules can complicate long-term financial decisions.
Explained simply
Inheritance tax is a tax paid when someone dies and leaves money or property to others. It only applies to large estates, with most people exempt because it starts at £325,000 (or £650,000 for married couples), and rises further if a home is left to children. The tax raised a record £8.5billion last year.
The tax authorities investigate estates to ensure families have properly declared assets and paid the right amount of tax. Inspectors examine bank statements, insurance policies and records of gifts to find assets that should have been reported. These investigations regularly uncover significant sums of unpaid tax that families owed but had not declared.
The inheritance tax system is set to change. From April 2027, pensions will be subject to inheritance tax for the first time, meaning a broader range of assets will be liable. These changes will expand who is affected by the tax and how much tax may be owed on estates.
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