Inheritance tax fines have soared over the past five years, with penalties for late notices rising by more than a third.
Freedom of Information requests show HMRC raked in £3.1million in the 2024-25 financial year due to late penalties.
In total, 5,200 estates failed to properly fill out the necessary paperwork on time, up from 3,850 families fined in 2020-21.
The main document which must be filled out for inheritance tax – known as an IHT400 form – contains a total of 122 questions and can require a number of supplementary schedules to be filled out too.
Additional schedules include areas such as gifts, pensions, business assets and trusts.
Fines for failing to submit an inheritance tax return on time start at £100, but rise to as much as £3,000 after 12 months.
Duncan Mitchell-Innes, from the law firm TWM Solicitors, said: “People often underestimate the complexity of the UK’s IHT rules.
“What seems like a straightforward task can quickly become time-consuming and technically challenging, particularly when HMRC requires extensive supporting evidence.
“This can lead to penalties if deadlines are missed.”
Inheritance tax is typically paid on estates with a total value of more than £325,000, at which point a 40 per cent levy is charged.
The threshold at which inheritance tax is paid has not changed since 2009, meaning an increasing number of bereaved families have found themselves being drawn into paying the charge.
The number is set to rise even further still in April 2027, at which point pensions will become liable for inheritance tax under a change in rules imposed by Chancellor Rachel Reeves.
Rachael Griffin, from wealth manager Quilter, said the expansion in the number of families forced to pay the death duty meant a rise in the number of people caught out by the complexity of the process was “inevitable”.
She said: “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.”
Delays in inheritance tax often emerge from families struggling to correctly identify all bank accounts, investments and gifts that are part of an estate.
Residential property owned by the deceased also often requires a professional valuation.
A spokesman for HMRC said: “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.”
