Tax & Accounting News

Inheritance Tax payers face interest rate hike

26/08/2009

Families faced with an inheritance tax (IHT) bill after the death of a loved one will soon encounter higher interest charges if they take longer than six months to pay up.

It has been announced that HM Revenue and Customs (HMRC) is to increase its interest rate on late payment to 3% from September, in a move expected to net the government an extra £10million per year.

The increase has prompted criticism that it amounts to a ‘stealth tax’ which would unfairly hit families who are struggling to sell a deceased relative’s property in the current depressed market.

At the same time, HMRC has lowered the rate it pays in interest when it returns overpayments which have been made on inheritance tax bills to 1% below base rate, with a floor of 0.5%.

However, HMRC has defended its position, stating its rates had been ‘streamlined’, following an 18-month consultation, so that all late tax payments were treated the same. A spokesperson for the department added that the move ‘had been largely welcomed by customer groups and their representatives’.