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HM Revenue and Customs (HMRC) opened 3,028 Inheritance Tax (IHT) investigations in the 2023-2024 tax year, recovering £285 million. This marks a significant decrease from the 5,537 investigations conducted in the 2018-2019 tax year, indicating a 45% reduction over five years. However, despite fewer investigations, the amount recovered per investigation has increased, suggesting that HMRC is taking a more targeted and effective enforcement approach.
While the proportion of estates subject to IHT investigations has declined, the complexity of the tax continues to raise concerns. Many still argue that the Inheritance Tax is wrong, particularly as families navigating estate administration may not fully understand the risks of making costly mistakes
Recent data reveals that Inheritance Tax receipts hit a record £7.1 billion in the 2022-2023 tax year, highlighting how more families are being drawn into the tax net. Furthermore, a 2022 YouGov poll found that over 59% of Britons believe Inheritance Tax is unfair, supporting the argument for reform. Such statistics fuel the belief among many that Inheritance Tax is wrong, particularly when it impacts grieving families already navigating complex estate administration processes.
The role of an Executor or Administrator: Risks and responsibilities
Personal Representatives (Executors if there’s a Will or Administrators if there’s no valid Will), are responsible for administering someone’s estate when they pass away. This includes handling paperwork, paying the correct amount of Inheritance Tax (IHT), managing assets, settling debts, handling Income Tax, and transferring the inheritance to beneficiaries.
The role is not to be taken lightly, as Executors and Administrators have a legal and financial duty to ensure everything is managed correctly and promptly. They are:
- Personally liable for the correct distribution of the estate;
- Responsible for maximising the estate’s value for beneficiaries;
- Accountable for any errors on the IHT return.
Many people underestimate the complexity of the role. For example, The Telegraph reported a case where a Personal Representative distributed an estate to a beneficiary, mistakenly believing the beneficiary would pay the IHT. The beneficiary left the country, leaving the Personal Representative liable for a £345,000 tax bill. This severe case highlights the importance of ensuring the estate is administered correctly.
Additionally, the average time it takes HMRC to process an IHT account is 12 weeks, which can significantly delay the distribution of assets, causing further stress for Executors and beneficiaries.
Simplifying Inheritance Tax
The complexity surrounding Inheritance Tax has led many to question its fairness. Those who argue that Inheritance Tax is wrong often cite how complicated regulations and unclear guidelines can lead to costly errors.In the 2024 Autumn Budget, the Chancellor introduced several key changes aimed at reforming and simplifying Inheritance Tax:
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Capping of reliefs: From April 2026, IHT relief for business and agricultural assets will be capped at £1 million. Assets exceeding this threshold will be subject to a reduced IHT rate of 20% instead of the standard 40% rate. This measure ensures that larger estates contribute a fairer share while still supporting smaller family-run enterprises;
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Extension of threshold freeze: The existing freeze on IHT thresholds, initially set to last until 2028, has been extended until 2030. This means the Nil-Rate Band and Residential Nil-Rate Band will remain at their current levels, potentially increasing the number of estates liable for IHT due to growing house prices;
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Reform of AIM-listed shares: From April 2026, most shares listed on the Alternative Investment Market (AIM) will no longer qualify for full IHT exemption. Instead, they will be taxed at a rate of 20%, closing a loophole that previously allowed certain investments to bypass IHT.
These reforms reflect the government's effort to modernise the Inheritance Tax system, addressing concerns about fairness and complexity. However, these adjustments also highlight the importance for Executors and Administrators to stay informed and seek professional advice to navigate the evolving tax landscape.
Why expert help matters
At Kings Court Trust, we believe Executors and Administrators must fully understand their responsibilities when administering an estate. With HMRC intensifying its scrutiny, the risks associated with getting Inheritance Tax wrong are higher than ever.
Estate administration can be extremely complex, which is why we advise placing the estate in the hands of experts. Kings Court Trust is one of the UK’s leading estate administration providers, managing the complicated practicalities after death so you can focus on life’s important moments.
If you have any questions about estate administration or Inheritance Tax, call our experienced Client Services Team on 0300 303 9000 or click below to get in touch.
