HM Revenue & Customs (HMRC) launched investigations into 7,500 probate cases last year after questioning the declared values of inherited properties. As a result, around 1,500 families were hit with additional inheritance tax (IHT) bills. The spike indicates a growing scrutiny trend as HMRC intensifies efforts to recover unpaid taxes
What Triggers HMRC Investigations?
When a person dies, their estate must be valued, with executors declaring assets to HMRC. If a property is later sold for significantly more than the declared estate value, HMRC may launch an inquiry. These investigations, initiated in over 7,500 cases last year alone, often compel HMRC to refer valuations to the Valuation Office Agency (VOA)
VOA Referrals and On-the-Ground Inspections
About 50% of the referrals proceeded to a VOA investigation. The VOA’s process includes site visits and requests for additional documentation. Often, the VOA accounts for factors such as land for development, which can significantly raise a property’s worth.
1,500 Families Face Bigger Bills
In approximately 1,500 cases, the VOA determined that the property value declared was too low. This led to HMRC issuing additional tax bills, typically 40% of the undervalued difference. Compared to the total number of inquiries, it's a substantial hit rate
Disputes May Go to Tribunal
When executors and HMRC cannot agree on a valuation, the matter can be escalated to the First-tier Tribunal. This formal process can be time-consuming and costly for families.
Increasing Investigation Numbers
In total, HMRC launched 3,961 inheritance tax investigations in the year to April 2025, a 31% year-on-year increase. However, the number of cases referred to the VOA dropped from nearly 16,000 in 2021–22
How Families Can Prepare
Wealth advisors recommend obtaining two independent professional valuations when filing estate documents. This dual assessment reduces the risk of undervaluation and strengthens defenses against HMRC challenges .
Inheritance Tax Rules Refresher
IHT is payable at 40% on estates exceeding £325,000. An additional £175,000 allowance for the main residence means a couple can pass on up to £1 million before taxes apply
Conclusion
HMRC is increasingly active in probing estate valuations, especially for high-value properties. Last year saw 7,500 valuations scrutinized, with 1,500 estates reassessed as undervalued, leading to additional inheritance tax demands. The pending merger of the Valuation Office Agency into HMRC may grant tax authorities greater oversight, which could exacerbate disputes.
Families are strongly advised to commission multiple professional valuations during estate administration, especially when properties include features that increase development potential. Early and thorough estate planning is essential to minimize unexpected tax liabilities and single-handedly ensure your heirs aren't hit with late penalties.
Frequently Asked Questions
Why is HMRC disputing so many valuations now?
HMRC has access to extensive market data and property-monitoring tools. When estate values seem low compared to market trends, HMRC flags these cases and opens an investigation .
What happens after HMRC refers a case to the Valuation Office Agency?
VOA inspectors may conduct physical visits, compare recent similar sales, and consider development potential. If they determine a property is undervalued, HMRC issues additional tax notices .
How much additional tax could families face?
The discrepancy in valuation typically results in a 40% inheritance tax on the difference. For example, if a property is undervalued by £500,000, the extra tax could be £200,000.
What if heirs disagree with HMRC’s valuation?
Disputes can be escalated to the First-tier Tribunal. Families should act quickly and secure their own professional valuations and legal advice.
How can families prevent unexpected inheritance tax bills?
Obtain at least two independent valuations from qualified professionals when preparing the estate paperwork. This helps ensure declared values align with market rates and reduces HMRC challenges.
