This was a 34% increase compared to £1.7m the year before, a Freedom of Information request from financial advisers NFU Mutual has shown, and means the value of inheritance tax penalties has increased by more than half in the past two years, revealed HMRC figures.

The hike in the amount of penalties being issued comes against a backdrop of rising inheritance tax liability as thousands more estates are being dragged into the unpopular tax. Last year 4% of estates paid inheritance tax with the average bill totalling £214,000.

Inheritance tax raised a record £5.76bn in 2022-23, up 16% in a single year, and a figure which is set to rise to at least £8bn by 2028.

The level of penalty will depend on why the inheritance tax has been underpaid. If the error is due to the family not taking ‘reasonable care’ the penalty can be up to 30% of the additional tax owed. if it’s deemed to be deliberate it can be up to 70% and if it’s ‘deliberate and concealed’ the penalty can be up to 100% of the additional tax owed.

Sean McCa