An inaccurate inheritance tax account can lead to a penalty under Schedule 24 to the Finance Act 2007 if the error was careless or deliberate and it understates the tax. The maximum is 30% of the extra tax for a careless error and up to 100% for a deliberate one, reduced for disclosure. An executor who took reasonable care, judged against their own abilities and circumstances, has no penalty to pay even if the account turns out to be wrong.

Which inheritance tax documents are covered?

Paragraph 1 of Schedule 24 lists the documents to which the inaccuracy penalty applies. For inheritance tax there are three entries: an account under section 216 or 217 of the Inheritance Tax Act 1984 (the IHT400 and any corrective account), information or documents under regulations made under section 256, and any statement or declaration in connection with a deduction, exemption or relief. So a claim to business relief or to gifts out of income falls within the regime as much as the asset values themselves.

HMRC’s Inheritance Tax Manual (IHTM36103) says the older penalty rules in sections 247 and 248 of the 1984 Act apply to deaths before 1 April 2009, and that for deaths on or after that date caseworkers should use the Compliance Handbook from CH80000. That is the regime described here.

When does an error lead to a penalty?

Two conditions must both be met. The inaccuracy must lead to an understatement of tax, a false or inflated loss, or a false or inflated repayment claim; and it must have been careless or deliberate. A document with several inaccuracies can carry a penalty for each one (paragraph 1(4)).

Paragraph 3 defines the behaviours:

  • Careless: the inaccuracy is due to a failure to take reasonable care.
  • Deliberate but not concealed: the inaccuracy is deliberate but no arrangements are made to hide it.
  • Deliberate and concealed: the inaccuracy is deliberate and there are arrangements to conceal it, such as false evidence supporting an inaccurate figure.

An innocent error does not stay innocent forever. Paragraph 3(2) treats it as careless if the person later discovers it and does not take reasonable steps to tell HMRC. CH81080 lists reasonable steps, such as asking an agent to tell HMRC, phoning, or writing to the officer, and says the speed of contact is relevant. For executors that means a prompt corrective account once a mistake comes to light.

It is for HMRC to show that a document contains a careless or deliberate inaccuracy, not for the executor to prove innocence (CH81180).

How is reasonable care judged for executors?

CH81120 says reasonable care cannot be identified without considering the particular person’s abilities and circumstances. HMRC does not expect the same expertise from an unrepresented individual as from a large company, but expects more care over large and complex affairs than simple ones. It expects anyone meeting an unfamiliar transaction to find out the correct treatment or take advice, and says that a person who remains unsure and draws attention to the point in the return has taken reasonable care even if they turn out to be wrong. For an IHT400 that means flagging doubtful values or claims in the additional information pages rather than burying them.

The Compliance Handbook gives executor examples. In CH81145, Susan estimates the balances on several of the deceased’s bank accounts instead of checking them, because she thinks they are small; HMRC says this shows a lack of reasonable care. In CH81151, Fiona enters her father’s house at the price he paid many years before, knowing it is worth far more; that is deliberate but not concealed. In CH81161, Peter omits a house his father gave him six years before death and alters the deed of gift to suggest an earlier date; that is deliberate and concealed.

Two features of inheritance tax help the careful executor. Section 216(3A) of the 1984 Act allows a provisional estimate where the exact value cannot be found after the fullest enquiries that are reasonably practicable, and the IHT400 declaration asks executors to list the boxes that are provisional. Professional help also counts. Where a person relies on information from someone else, CH81125 asks what that person supplied, what evidence came with it and what checks were made. On valuations, HMRC tells its caseworkers (IHTM36153 and IHTM36154) that the question is whether the executors were negligent rather than the valuer, and to ask whether the valuer was told to give an open market value, was given all relevant information, and whether offers or a sale before the account was sent pointed to a different figure. For property, see valuing property for probate.

How much can the penalty be?

The penalty is a percentage of the potential lost revenue, which paragraph 5 defines as the additional tax due as a result of correcting the inaccuracy. Paragraph 4 sets the maximum where the inaccuracy is purely domestic, and paragraph 10 sets how far disclosure can bring it down.

Behaviour Maximum Minimum, prompted disclosure Minimum, unprompted disclosure
Careless 30% 15% 0%
Deliberate but not concealed 70% 35% 20%
Deliberate and concealed 100% 50% 30%

Higher percentages, up to 200%, can apply where an inaccuracy involves an offshore matter or transfer, and paragraph 4A expressly includes inheritance tax in the offshore categories; see offshore penalties.

A disclosure is unprompted if made when the person has no reason to believe HMRC has discovered or is about to discover the inaccuracy (paragraph 9(2)). The reduction within the range reflects the quality of the disclosure, meaning telling HMRC, helping to quantify the error and giving access to records, with timing, nature and extent all counting. HMRC may also reduce a penalty for special circumstances, but paragraph 11 rules out ability to pay. A careless penalty can be suspended for up to two years with conditions (paragraph 14); see HMRC suspended penalties.

Are executors liable for an agent’s mistakes or a beneficiary’s lies?

An executor remains liable for a careless inaccuracy in an account sent on their behalf (paragraph 18(1)), but paragraph 18(3) removes the liability if they satisfy HMRC that they took reasonable care to avoid the inaccuracy. Reviewing the draft, answering the agent’s questions fully and querying anything that looks wrong are the practical evidence of that; see relying on an adviser and reasonable care.

Where the error comes from someone else, paragraph 1A lets HMRC penalise that person directly if they deliberately supplied false information or withheld information intending the document to be inaccurate. A beneficiary who hides a lifetime gift from the executors is the obvious case, and the penalty can apply whether or not the executor is penalised too.

How might a penalty be worked out?

Illustration only. An estate is above the nil rate band, so extra assets bear tax at 40%. The executors omit a £20,000 savings account that appeared on the deceased’s tax return. The potential lost revenue is £8,000.

  • If HMRC finds the omission careless, the maximum is 30%, or £2,400.
  • If the executors spotted it themselves and sent a corrective account before any HMRC contact, the disclosure is unprompted and the penalty can be reduced as far as nil.
  • If they only disclosed it after HMRC asked about the account, the floor is 15%, or £1,200.
  • If they knew about the account and left it out, the range is 20% to 70%, or £1,600 to £5,600, depending on the disclosure.

Interest on the extra tax runs separately from the end of the sixth month after death.

Can a penalty be challenged?

Yes. Paragraph 15 gives a right of appeal against a decision that a penalty is payable, against its amount, against a refusal to suspend it and against the conditions of suspension. Paragraph 16 says the appeal is treated like an appeal against an assessment to the tax concerned, including HMRC review and the First tier Tribunal, but the penalty does not have to be paid before the appeal is decided.

What mistakes lead to penalties?

  • Estimating bank balances, shares or household contents without asking for date of death figures.
  • Using an old purchase price, a council tax band or an online estimate for property instead of an open market valuation.
  • Leaving out gifts in the seven years before death because the family says there were none, without checking bank statements.
  • Entering a provisional figure without listing it as provisional in the declaration.
  • Finding an error after the IHT400 has gone in and not telling HMRC promptly.

For how HMRC selects and reviews accounts, see HMRC checks on inheritance tax accounts.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.