Inheritance Tax Update: HMRC steps up scrutiny as major changes approach

HMRC ramps up inheritance tax investigations

HMRC has significantly increased its scrutiny of inheritance tax returns. During the 2025/26 tax year, it opened almost 5,000 inheritance tax investigations – the highest number in six years.

Around 40% of those investigations resulted in inheritance tax bills being increased, highlighting the importance of accurate estate valuations and careful record-keeping.

The Government is also expected to collect substantially more inheritance tax over the coming years, with receipts forecast to rise from £7.1 billion in 2022/23 to £13.5 billion by 2029/30. Rising house prices, frozen allowances and planned changes to pension taxation are all contributing to the increase.

Families are acting before pension changes

One of the most significant confirmed changes is the planned inclusion of unused pension funds within the inheritance tax regime from April 2027.

As a result, many wealthier families are reviewing their estate planning strategies now. Research by wealth management firm RBC Brewin Dolphin found that almost three in ten affluent individuals have already changed their gifting behaviour in anticipation of the new rules.

Among those making changes, almost half are gifting more frequently, while many are choosing to make gifts earlier in life to maximise the potential inheritance tax benefits.

Making lifetime gifts can be an effective planning tool, but the rules are complex. In many cases, gifts must survive the seven-year rule to fall outside the estate for inheritance tax purposes, and there are various exemptions and reliefs that should be considered.

“The planned pension changes have prompted many families to revisit their inheritance tax plans. Gifting can be an effective way to reduce the value of an estate, but it’s important to understand the rules and ensure gifts are made as part of a considered plan rather than simply reacting to tax changes”, says Ammad.

Proposed tax changes could increase bills further

Further reforms have been discussed that could increase the tax burden on estates.

One proposal would align capital gains tax rates with income tax rates. Another would remove the capital gains tax uplift that currently applies when assets pass on death.

If both changes were introduced, some families could face substantially larger tax bills, with some estimates suggesting additional costs of up to £120,000 for certain estates. While these proposals have not been implemented, they demonstrate how quickly the tax landscape can change.

“Although these proposals are not yet set in stone, they underline why estate planning shouldn’t be a one-off exercise. Reviewing your plans regularly ensures you’re prepared for legislative changes and can adapt your strategy if new rules are introduced”, says Ammad.

Could property taxes change too?

There has also been speculation about wider property tax reform.

One proposal that has attracted attention is the possible replacement of council tax—and potentially stamp duty—with an annual land value tax based on the value of the land rather than the property itself.

While no such policy has been announced by the current Government, commentators have suggested that an annual charge of around 1% of land value could particularly affect homeowners who are asset-rich but cash-poor, such as retirees living in high-value properties. Any future reforms could have important implications for estate and inheritance tax planning.