Wealth managers have warned there is a “clear risk” that even more families will be hit with fines from next April when pensions become liable for inheritance tax.
Rachael Griffin, of wealth manager Quilter, said delays in form-filling were “inevitable” because of the complexity of the process.
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.
“There is a clear risk [that the number of penalties] intensifies from April. Pension death benefits will move more squarely into the inheritance tax regime, expanding both the number of estates in scope and the complexity of administering them.”
Duncan Mitchell-Innes, of law firm TWM Solicitors, said: “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.”
Families can use ballpark valuations if the estate has not been fully valued after 12 months. If the levy is overpaid, they will be refunded by HMRC.
Earlier this year, the Institute of Economic Affairs reported that Britain had one of the harshest inheritance tax regimes in the Western world, with HMRC collecting a record-breaking £8.2bn from grieving families in the 2024-25 tax year.
HMRC said it is “simply not true” that penalties will become more common from next year.
A spokesman said: “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 £52m to simplify and digitalise our inheritance tax service to make the process quicker and easier.”
