HMRC has issued a warning to Britons as inheritance tax penalties have surged by a third, with grieving families paying out £3 million in fines. The tax department has imposed late-filing penalties on the executors of 5,200 estates during 2024-25, totaling £3.1 million, averaging £596 per case. Penalties for late submission of inheritance tax returns start at £100 and can escalate to £3,000 after twelve months.
Why Are Penalties Rising?
Rachael Griffin, from wealth manager Quilter, stated that delays in form-filling were "inevitable." She added: "As more modest estates are caught, there is a greater tendency to try and handle returns without advice. That creates predictable friction as many executors are navigating this for the first time, running up against a process that is evidence-heavy, deadline-driven and not particularly intuitive. Delays are an almost inevitable outcome, and penalties follow."
Griffin also warned that the number of penalties could intensify from April, as pension death benefits move more squarely into the inheritance tax regime, expanding both the number of estates in scope and the complexity of administering them.
HMRC's Response
An HMRC spokesman responded: "The reality is we reduced reporting requirements during this period for most non-taxpaying estates. We're constantly looking at ways to simplify returns, and the Government is investing £52 million to simplify and digitalise our inheritance tax service to make the process quicker and easier."
Duncan Mitchell-Innes, from law firm TWM Solicitors, highlighted the complexity: "The basic inheritance tax form (IHT400) has 122 questions, often requiring detailed financial and historical information. In many cases, this must be supplemented by additional schedules – of which there are more than 30 – depending on the nature of the estate."
What Executors Need to Know
- Penalties for late filing start at £100 and increase to £3,000 after 12 months.
- The IHT400 form has 122 questions and may require up to 30 additional schedules.
- HMRC is investing £52 million to digitalize the inheritance tax service.
Families are advised to seek professional advice to avoid costly penalties, especially as the inheritance tax regime expands to include more estates.
