His Majesty’s Revenue and Customs (HMRC) has raised concerns that wealthy taxpayers, including Nigerians living in the UK, have underpaid inheritance tax (IHT) to the tune of £325 million for the year ending March 31, 2024.
UHY Hacker Young, a prominent accountancy firm, warns that this figure could increase “significantly” in the coming years, especially with IHT increases set for April 2026. Neela Chauhan, a partner at UHY Hacker Young, highlighted that substantial tax hikes often lead to a rise in tax avoidance and evasion, as individuals try to mitigate the impact.
Inheritance tax remains one of the least popular taxes in the UK, which has led many to explore ways to reduce their IHT liabilities. This, combined with recent policy changes, is expected to further increase IHT-related disputes.
Chancellor Rachel Reeves’ recent decision to impose a £1 million cap on agriculture and business property relief, along with a 50% cut in IHT tax breaks on AIM (Alternative Investment Market) shares, will add significantly to the IHT burden for many, including Nigerians who own agricultural land or business properties in the UK.
In another significant change, from April 2027, inherited pensions will also be included within the scope of IHT, contributing further to the total IHT bills for estates.
As the cost of IHT rises, so too will the likelihood of disputes between taxpayers and HMRC, particularly as the UK tax body increases its investigations into IHT-related underpayment. In the 2023/24 tax year alone, HMRC recovered an extra £285 million from IHT investigations, a 14% increase from the previous year.
What HMRC Looks for in IHT Investigations:
HMRC is using a variety of methods to identify potential underreporting of IHT, including cross-referencing data from HM Land Registry and Google Street View, as well as reviewing property contents insurance to identify valuable items that may have been omitted from IHT returns. Here are the common issues HMRC investigates:
- Undervaluing Residential Properties: Deliberately undervaluing a property that is part of an estate, such as claiming the property is in disrepair or basing the value on outdated surveys.
- Failure to Declare Assets: Not declaring cash, jewellery, paintings, or other valuables passed on to relatives—especially when the will is handled by a lay executor.
- Recent Gifts Claimed as Old: Claiming that a significant cash gift was given more than seven years ago (and thus exempt from IHT), when it was actually given more recently and should be subject to tax.
For Nigerian nationals in the UK, it’s essential to stay informed about these developments, as the IHT landscape is changing rapidly, and compliance is key to avoiding costly mistakes and potential investigations. Proper estate planning and professional advice can help mitigate the impact of IHT on your legacy.
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