IHT Late Filing Penalties: Is Your Estate Ready for the 122-Question Form?

HMRC issued 5,200 penalties for late inheritance tax returns in 2024/25, marking a 35 per cent rise over the past five years, with the total value of penalties reaching £3.1 million, according to Freedom of Information data obtained by TVM Solicitors. If you own property in the UK, it is important to understand what is driving this increase and what it means for the executor named in your will or for a role you may be called upon to fulfil. 

The rise in penalties isn’t just due to stricter HMRC enforcement. More estates are now caught by inheritance tax than in recent decades. The IHT400 form has 122 questions and may require up to 30 supplementary schedules. Many families try to complete it without professional help, leading to missed deadlines. Under section 216 of the Inheritance Tax Act 1984, personal representatives have 12 months from the end of the month of death to submit the return. Penalties start once this period passes and continue until the return is filed.

Why Are IHT Penalties Rising So Sharply? 

HMRC collected a record £8.2 billion in inheritance tax in 2024/25 as rising property values and frozen allowances pushed more estates into the tax net. The Office for Budget Responsibility forecasts that this figure could exceed £11 billion by 2027/28. Every estate that goes over the taxable threshold must file an inheritance tax return, yet the process remains complex and time-consuming. 

The nil‑rate band has been fixed at £325,000 since April 2009 and is set to remain frozen until at least 2030/31. This means that even a typical home in much of England or a modest semi‑detached property in London can push an estate above the threshold before any other assets are considered. Many families attempt to complete the IHT400 themselves, often underestimating how much detailed evidence HMRC requires. As a result, late or incomplete returns are becoming more common, contributing to the 35 per cent rise in penalties over the past five years. 

What Does the IHT400 Actually Involve? 

The IHT400 is the main form personal representatives use to report estates that may be liable for inheritance tax. Since 1 January 2022, the simpler IHT205 no longer applies in England and Wales, and excepted estates now declare values within the probate application itself. Any estate above the threshold, or one with property, trusts, significant gifts, or foreign assets, must complete a full IHT400. 

While the form has 122 questions, the real challenge is the supporting schedules. Property‑holding estates often need multiple attachments, such as IHT404 for jointly owned assets, IHT405 for residential and investment properties, IHT403 for gifts, and IHT417 for foreign assets. With over 20 named supplementary schedules available, most estates with a property portfolio will require several, making the process time-consuming and detail-heavy. 

What Takes the Most Time? 

All assets in an estate must be valued at their open market price on the date of death. For property, this means obtaining a professional valuation from a Royal Institution of Chartered Surveyors (RICS) surveyor. HMRC will not accept estate agent estimates, online listings, or family guesses. These valuations must be completed before submitting the IHT400 form. 

Executors must also identify any gifts made in the seven years before death, including bank transfers, investments, and share certificates. Some gifts may be exempt, such as those made from regular income, but evidence must be provided, as HMRC does not apply exemptions automatically. Careful record-keeping and accurate valuations are essential to avoid delays and penalties.

What is the Exact Penalty Structure for Late IHT Returns? 

If you miss the deadline for submitting an IHT return, HMRC can charge penalties. The amount depends on how late the return is and how much tax is due. 

Timeline of Penalties: 

Monthly Penalties After 12 Months 

Key Points to Remember: 

Worked Example: Three Estates & Their IHT Exposure 

These figures are illustrative. The correct IHT calculation depends on the specific facts of each estate.

Who Is Most at Risk of an IHT Late Filing Penalty? 

Three Groups at Greater Risk of Missing the IHT Deadline 

Executors Without Professional Support 

Landlords & Buy-to-Let Investors 

Estates with multiple properties require separate schedules, individual valuations, and careful reporting. Large tax liabilities often must be paid before probate is granted, which can create practical cashflow challenges since property cannot usually be sold until probate is obtained. The direct payment scheme covers some bank and building society accounts, but does not extend to property proceeds. 

Families Relying on Pension Wealth 

Unused defined contribution pensions have historically been outside the taxable estate, providing an efficient way to pass wealth. From 6 April 2027, most unused DC pensions will be included in the estate for inheritance tax purposes. Executors and families who planned around this previous treatment will need to review the rules and obtain pension valuations where required. Benefits passing to a surviving spouse or civil partner continue to be exempt.

Five Steps to Reduce Your Risk of a Penalty 

Here are the five key steps to avoid IHT mistakes:

How Reliefs Can Reduce Inheritance Tax & Why They Are Often Missed 

Reliefs are legal entitlements that must be claimed and evidenced. Executors need to know they exist, understand the qualifying conditions, and provide documentation to secure them. 

Business Property Relief reduces the value of qualifying business assets and certain unquoted shares by 50% or 100%, subject to a combined limit for business and agricultural assets. Proof of ownership and the nature of the business are required. 

Agricultural Property Relief applies to qualifying farmland and farmhouses. The property must be genuinely used for farming, and some values may only qualify for partial relief. 

Spouse and Civil Partner Exemption allows transfers between spouses or civil partners to be fully exempt from inheritance tax, but the exemption applies only if assets are passed correctly under the will or trust. 

Normal Expenditure Out of Income Exemption applies to regular gifts from surplus income that do not reduce the donor’s standard of living. Supporting records are essential to claim this relief. 

Many reliefs are missed because they require identification and documentation. Early planning and careful review of the estate can significantly reduce the inheritance tax liability. 

Frequently Asked Questions 

Conclusion 

Rising property values and the complexity of the 122-question IHT400 form mean more families are now caught by inheritance tax than ever before. The inclusion of pension assets from April 2027 adds another layer of reporting and valuation, creating additional points where errors or delays can occur. 

If your estate includes property above £325,000 or a combination of property, savings, and pension assets that approaches this threshold, an IHT400 will likely be required. Many executors do not realise this until they are already managing the estate. Missing the filing deadline can result in penalties, unnecessary tax, and lost reliefs, which often cost more than professional guidance. Engaging the right support from the outset is the most effective way to ensure the estate is administered accurately and on time.