Inheritance tax charges to rise

Bereaved families will face higher charges for late payments of inheritance tax (IHT) from next month.

HM Revenue and Customs (HMRC) is increasing the interest rate payable on late inheritance tax bills to 3 per cent while cutting the rate it pays in interest when it returns overpayments to just 0.5 per cent.

Accountants have condemned the move as “unfair” and “unjustifiable”. “It’s a desperate step by the government to raise revenues and it will hit those who are forced to sell properties to raise money to settle their bill particularly hard,” said Mike Warburton at accountants Grant Thornton.

IHT is levied on estates, including assets such as property, possessions, money and investments, worth more than £325,000. The value of the estate above that threshold is taxed at 40 per cent. Following the death of a family member relatives must pay tax within six months on a proportion of the money and property left to them.

HMRC said just 3 per cent of estates pay IHT and those struggling to pay the bill can pay in instalments for up to 10 years, although this will be subject to the late payment interest charges.

HMRC said the move was not to raise revenue but was a result of harmonising tax rates. A spokesman said: “The alignment of rates in September will mean that all tax paid late is subject to interest at the same rate, ensuring all taxpayers are treated equally.”