Avoid Common Executor IHT Mistakes in the UK

Being named as an executor feels like an honour, but it comes with real tax responsibilities that many people are not prepared for. HMRC collected over £7.5 billion in Inheritance Tax in 2023 to 2024, according to HMRC statistics, and mistakes on estate returns are one of the main reasons families end up paying more than they should. 

Getting the numbers wrong, missing a relief, or filing late can lead to penalties and extra costs. Some executors even end up personally liable for taxes that were not paid correctly. The good news is that most of these mistakes are avoidable once you know what to look out for.

What Does an Executor Actually Have to Do?

When someone dies in the UK, the people left in charge of sorting out their estate are called executors. One of the biggest jobs is working out if any Inheritance Tax is owed. 

According to HMRC, IHT is charged at 40% on anything above £325,000, which is called the nil-rate band. The tax usually has to be paid within six months of the person’s passing away. Miss that deadline and interest starts building up straight away.

As an executor, you are responsible for:

• Working out the total value of all assets owned
• Completing the correct HMRC forms
• Paying any tax that is owed on time
• Keeping records of all decisions made

Estates can include a wide range of assets . Property, savings, investments, pensions, life insurance, business assets, and even cryptocurrency all count. Each one may be treated differently under UK tax rules. That is what makes this job harder than most people expect.

Getting the value of an asset wrong, missing a tax relief, or filing the return late can all cause serious problems. HMRC does check these returns, and errors can lead to penalties and extra costs. Executor IHT mistakes in the UK happen more often than most people think, and they can affect both the estate and the executor personally.

If you are dealing with a complex estate, our private client tax team can help you stay on the right side of HMRC from the very beginning.

What Are the Most Common Executor IHT Mistakes in the UK?

Executor IHT mistakes in the UK tend to follow the same patterns. Knowing what they are makes it much easier to avoid them.

Undervaluing Assets

This is one of the most common mistakes. It often happens with property, where an informal estimate is used instead of a proper valuation. HMRC expects open market valuations, meaning the price the asset would realistically sell for on the date of death. If they think a value has been underreported, they can open an investigation.

Missing Gifts Made in the Last Seven Years

UK tax rules say that gifts made in the seven years before death must be reported. These are called potentially exempt transfers. Many executors simply do not know this rule exists, or they cannot find the records needed to trace these payments.

Failing to Claim Available Reliefs

Several reliefs can reduce the IHT bill, but they are often missed. Business Property Relief and Agricultural Property Relief are two of the most valuable. Executors who are not aware of these can end up paying more tax than necessary.

Getting the Nil-Rate Band Wrong

A surviving spouse can inherit the unused nil-rate band from their partner, meaning up to £650,000 may be sheltered. There is also an additional £175,000 allowance when a family home passes to direct descendants. Missing these can lead to a much higher tax bill than is actually owed.

Filing Late

IHT must be paid within six months of the end of the month in which the person died. Delays happen, especially in complicated estates, but HMRC will charge interest from the day the payment is overdue.

If any of these apply to you, specialist support with tax disputes can help you correct the situation before it gets worse.

For further guidance, read our article: 7 Common Mistakes When Completing an IHT400. 

Why Do Executors Undervalue Assets?

Undervaluing assets is one of the most common executor IHT mistakes in the UK, and it is rarely done on purpose. It usually comes down to a lack of professional valuations and a limited understanding of what HMRC actually expects.

Common Reasons It Happens

• Using an old bank statement to value shares or investments
• Estimating the value of jewellery or personal belongings without expert input
• Relying on a rough idea of what a property is worth rather than a formal assessment
• Not knowing that digital assets like cryptocurrency need to be included at all

HMRC expects what is called an open market valuation. This means the realistic price the asset would achieve if sold on the open market on the date of death. Anything less detailed than that leaves the return open to challenge.

Cryptocurrency and Digital Assets

This is a fast-growing problem area. Many executors do not know the deceased held crypto, or they have no idea how to value it. Under UK tax rules, all digital assets must be reported as part of the estate. Our crypto tax specialists can help identify and correctly value these holdings.

Property

Property is the most common trigger for an HMRC dispute. If the declared value looks too low compared to local market prices, or if the property sells for more shortly after death, HMRC is likely to ask questions. A formal RICS valuation is the best way to protect against this. Property tax advice is worth getting early if real estate is involved in the estate.

According to GOV.UK, the value used for IHT purposes can also affect Capital Gains Tax if the asset is later sold, making accuracy even more important.

What Happens If an Executor Gets It Wrong?

Executor IHT mistakes in the UK can have serious consequences, and not just for the estate. The executor themselves can face personal financial risk if things are not handled correctly.

HMRC Can Open an Enquiry

If HMRC believes an estate return is incorrect or incomplete, they can open a formal investigation. This can result in:

• An additional tax being charged on top of what was already paid
• Interest on any unpaid amounts
• Financial penalties, which can be significant if HMRC believes information was withheld

These enquiries can happen even after the estate has been distributed, which is why getting it right from the start matters so much.

Executors Can Be Personally Liable

If the estate is distributed to beneficiaries before all the tax is paid, and it later turns out more was owed, the executor may have to cover the difference from their own money. This is one of the less well-known risks of the role.

What to Do If Something Has Gone Wrong

The earlier a problem is spotted, the easier it is to deal with. If you think an error has been made on an estate return, it is important to act quickly rather than wait for HMRC to raise it. Support with tax disputes and investigations can help you understand your options and respond in the right way.

You can also find general guidance on what HMRC expects from estate returns on GOV.UK, though, professional advice is usually needed for anything complex.

Protecting yourself as an executor means making sure the return is accurate, complete, and filed on time. Our private client tax team works with executors to do exactly that.

Can You Claim Reliefs to Reduce the IHT Bill?

Yes, and claiming the right reliefs is one of the most important parts of completing an estate return. Many executor IHT mistakes in the UK come from simply not knowing these reliefs exist.

The Main Reliefs Available

Business Property Relief (BPR)

This can reduce the value of qualifying business assets by either 50% or 100%. It applies to things like shares in unlisted companies or interests in a trading business.

Agricultural Property Relief (APR) 

This applies to farmland and certain buildings used for agriculture. Like BPR, it can reduce the taxable value significantly.

Charity Exemption 

Any gifts left to registered UK charities are completely free from IHT, no matter the size.

Spouse and Civil Partner Exemption 

Assets passed directly to a surviving spouse or civil partner are generally exempt from IHT altogether.

Residence Nil-Rate Band 

This gives an additional £175,000 allowance when a family home is left to direct descendants such as children or grandchildren.

Each of these reliefs comes with conditions. HMRC looks at them carefully, and a claim that does not meet the criteria will be challenged. Our private client tax specialists can check which reliefs apply and make sure they are claimed correctly.

If the estate includes business shares or company interests, corporate and business tax advice may be needed to confirm whether Business Property Relief applies. Getting this wrong in either direction, claiming too much or missing it entirely, can be costly.

Does HMRC Check Estate Tax Returns?

Yes, and more thoroughly than many people expect. One of the most important things to understand about executor IHT mistakes in the UK is that they rarely go unnoticed.

How HMRC Reviews Estate Returns

HMRC has a dedicated team that looks at estate returns as a matter of routine. They do not simply accept the figures that are submitted. According to HMRC guidance, they can open an enquiry up to five years after a return has been filed if they believe something is missing or incorrect.

They cross-reference information from multiple sources, including:

• Banks and building societies
• HM Land Registry
• Financial institutions and investment platforms
• Probate records

This means that assets that were not declared are often picked up through these checks. Executors who think something might be missed are usually wrong.

What Triggers a Review?

Property is the most common trigger. If the value declared on the estate return looks low compared to similar properties in the same area, or if the property sells for significantly more shortly after death, HMRC is likely to ask questions.

Other common triggers include estates with business assets, large cash gifts made before death, or returns where no reliefs have been claimed despite the estate appearing to qualify.

How to Protect Yourself

The best protection is a thorough, accurate return supported by proper valuations and clear records. If HMRC does raise questions, specialist support with tax disputes can help you respond correctly and avoid unnecessary penalties.

Accuracy from the start is always better than trying to correct things later. Our property tax team can help where real estate is involved in the estate.

When Should You Get Professional Help?

Some executors manage simpler estates without professional support, and that is fine. But executor IHT mistakes in the UK are far more likely when the estate is complex, and the cost of getting it wrong can far outweigh the cost of getting help early.

Signs You Probably Need Professional Advice

• The estate includes property, whether residential or commercial
• There are business assets or shares in a private company
• The deceased made significant gifts in the seven years before death
• The estate includes investments, pensions, or digital assets like cryptocurrency
• The deceased owned assets outside the UK
• There are disputes between beneficiaries

Any one of these factors can make an estate significantly more complicated. Trying to handle them without expert guidance increases the risk of errors that HMRC may later pick up.

When Executors Are Also Beneficiaries

This is a situation worth paying particular attention to. If you are both an executor and someone who benefits from the estate, there is a potential conflict of interest. Having an independent adviser involved protects everyone and helps make sure decisions are made fairly and correctly.

Our private client tax team works with executors in exactly these kinds of situations. We help make sure the return is accurate, all reliefs are claimed, and HMRC requirements are met from start to finish.

Where overseas assets are involved, specialist international tax advice may also be needed, as the rules around non-UK domicile and foreign assets can be particularly complex.

For a full overview of what executors are expected to report, GOV.UK provides useful guidance on personal tax obligations that often run alongside estate administration.

Protect Yourself From Executor Tax Mistakes Today

Executor IHT mistakes in the UK can be expensive and stressful to fix, especially once the estate has already been distributed. Small errors in asset values, missed reliefs, or a late filing can quickly turn into a much bigger problem with HMRC.

The good news is that none of this has to fall entirely on your shoulders. ETC Tax helps executors, families, and advisers get estate returns right from the start. From valuing assets correctly to making sure every available relief is claimed, the right support makes a real difference.

If you are acting as an executor and want to make sure everything is handled properly, contact ETC Tax today. Our private client tax team is ready to help.