BEREAVED families are paying higher inheritance tax penalties, with £2.28m penalties raised in the last tax year, a Freedom of Information request has revealed.

This was a 34% increase compared to the year before, the FOI from financial advisers NFU Mutual has shown.

It means the value of inheritance tax penalties has increased by more than half in the past two years.

The increase suggests the complexities of inheritance tax are catching more people out and leading to higher penalties, NFU Mutual said.

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Penalties are normally issued to families who either undervalue the assets being passed down or don’t include them on the return.

The rising value of property and other assets may have contributed to families underestimating values.

Chartered financial planner at NFU Mutual, Sean McCann, said: “Many are also not aware of the need to include gifts made by the deceased in the seven years before their death, or those where they continued to enjoy a benefit from.

“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."

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Mr McCann added: “Often families don’t get professional valuations for property or other valuable assets which can mean the value is understated due to lack of ‘reasonable care’.

“If HMRC take the view that the family have intentionally provided incorrect information or not included assets on the inheritance tax return, this may be deemed ‘deliberate’.

“Taking steps to hide errors is likely to be viewed as ‘deliberate and concealed’ and attract a larger penalty in addition to the extra tax owed."