﻿ HM Revenue & Customs: Interest on Inheritance Tax - when and how it is charged

In this section:

Interest on Inheritance Tax - when and how it is charged

If you’re the executor or personal representative for the estate of someone who has died, you have six months from the end of the month in which they died to pay any Inheritance Tax due. After that, interest will be charged on the amount of tax outstanding.

When do interest charges start?

You have to pay interest from the day after the ‘due date’, which is exactly six months from the end of the month in which the person died. It doesn’t matter when in the month they died - the due date is worked out from the end of that month.

This table shows you how to work out the due date and the date when interest charges start.

Month of death

Due date

Interest starts from

January

31 July

1 August

February

31 August

1 September

March

30 September

1 October

April

31 October

1 November

May

30 November

1 December

June

31 December

1 January

July

31 January

1 February

August

28/29 February

1 March

September

31 March

1 April

October

30 April

1 May

November

31 May

1 June

December

30 June

1 July

Top

What is the rate of interest?

Interest rates change from time to time, you can follow the link below to see interest rates from October 1988 to date.

Top

Working out how much interest is due

Once you've filled in the forms and are getting ready to pay the tax, follow the steps below to work out how much interest is due:

Step one: work out how many days there are between the date interest started and the date you expect to pay the tax. You must include the day interest started and the day you intend to pay in your calculation (see the example below).

Step two: find out the interest rate for the period over which you have been unable to pay the Inheritance Tax in full.

Step three: multiply the tax due by the interest rate then by the number of days and divide the answer by 366 (tax due x the interest rate x the number of days ÷ 366 = interest due).

Example

The death occurred on 10 December 2006, so the due date is 30 June 2007. A tax payment of £5,000 is made to HM Revenue & Customs (HMRC) on 10 November 2007.

Interest charges start on 1 July 2007 and finish on 10 November 2007, with an interest rate increase on 6 August 2007.

You work out the interest as follows:

From 1 July to 5 August 2007

• Step one: number of days: 36 (31 in July, 5 in August)
• Step two: interest rate: 4 per cent
• Step three: interest due: £5,000 x 4% x 36 ÷ 366 = £19.67

From 6 August to 10 November 2007

• Step one: number of days: 97 (26 in August, 30 in September, 31 in October, 10 in November)
• Step two interest rate: 5 per cent
• Step three:interest due: £5,000 x 5% x 97 ÷ 366 = £66.26

So the total amount of interest to pay is £19.67 + £66.26 = £85.93

It can be complicated to work out the right amount of interest. If you need help, try the interest calculator or call the Probate and Inheritance Tax Helpline.

Work out the interest due with an interest calculator

Contact the Probate and Inheritance Tax Helpline

Top

Interest when paying Inheritance Tax in instalments

If you pay Inheritance Tax in annual instalments, the interest charges are worked out differently.

See our guide on interest when paying Inheritance Tax in instalments

Top

Top