HMRC unveils inheritance tax hike

Date: 17th August 2009

Britons are facing an increase in costs related to inheritance tax if they do not pay in time.

Taxation authority HM Revenue & Customs (HMRC) has announced that interest on these costs will increase to three per cent from their previous level of zero.

This is despite the fact that the Bank of England base rate, which the late payment interest rate usually tracks, has not been raised since March 2009.

HMRC is also to cut the interest it pays taxpayers who have previously overpaid on inheritance tax to 0.5 per cent.

Inheritance tax is paid by families on the estate of a deceased relative, with a levy of 40 per cent put on all assets worth above a £325,000 threshold.

A spokesman said: "Interest is not a penalty but compensation for tax paid late.

"We are streamlining the rates charged and paid for interest to simplify and make things fairer for customers.

He added that the organisation had been consulting on the move for the past year and a half.

The changes come into effect in September.

Payments of inheritance tax are due in to HMRC within six months of death.