HMRC tax crackdown warning as Brits face £246m inheritance raid | Personal Finance | Finance

An astonishing £246 million was recovered by HMRC last year after thousands of investigations found unpaid inheritance tax (IHT) throughout the last tax year. Around 4,000 compliance investigations were conducted, as revealed by HMRC figures examined by TWM Solicitors. The tax office discovered these unpaid taxes by cross-examining this data with other government bodies, such as the Land Registry and the Trust Registration Service, as well as external sources such as Google Maps.

As it stands, people who inherit assets of up to £325,000 do not generally have to pay inheritance tax. However, once the inherited assets exceed that number, a 40% levy is slapped on, often leading to hefty tax bills. But if assets, such as property, are passed down directly from parents or grandparents, then the threshold is raised to £500,000. These thresholds have remained the same since 2009, meaning more families are over the threshold as asset values rise with inflation and rising property prices.

Inheritance tax underpayments can happen when properties are sold years after valuations, when significant discrepancies between market value and initial estimations are found.

Ensuring the correct tax is paid is the responsibility of the executor of the will. HMRC can come after them directly if they discover that a full tax bill has not been paid.

However, inheritance tax is often overpaid, and HMRC has issued refunds in these cases. In some circumstances, those who have overpaid get more than 2% interest back.

The Telegraph’s analysis of HMRC data showed that more than 6,000 estates received money back last year, and refunds totalled more than £300 million. 

Overpayments tend to happen when the value of assets falls over time, meaning you have paid the rate you would have when the asset was of higher value. For example, this can happen when homes have a lower selling price than when they were bought by the deceased. 

“Rule number one: the first thing is there is no inheritance tax on anything left between spouses,” he said. “Married or civil partners, not just living together.”

“Even if you are Bruce Wayne, leaving £100billion to your husband or wife, you do not; there is no inheritance tax paid on that whatsoever.”

He added: “The second rule: you can leave any unused allowance to your spouse (married or civil partner again, only).”