Late payment fee for inheritance tax 'to rise to 3%'

The interest chargeable on late payments of inheritance tax (IHT) is set to rise to 3% next month.

Inheritance tax is currently payable at 40% on the proportion of an estate that is worth more than that the threshold of £325,000.

Payments are due within six months of death, and the timescales can cause problems for some families, particularly where assets such as property are involved.

Since March, the interest on late IHT payments has been zero, in line with the low Bank of England base rate of 0.5%.

The Taxpayers' Alliance has described the increase as 'a seriously retrograde step'.

HM Revenue & Customs (HMRC) said that it is 'compensation for tax paid late' rather than a penalty.

Meanwhile, the interest paid by HMRC on tax refunds will stand at 1% below the Bank of England's interest rate, although it will not drop below a floor of 0.5%.

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