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ACCA Applied Skills · Taxation (UK) · Payment of inheritance tax

Carl died on 10 January 2026 and his executors paid IHT of £60,000 on his estate on the due date of 31 July 2026. Later, HMRC repaid £6,000 of this as an overpayment 6 months after the date of payment. Using the Finance Act 2025 rates of interest, what interest does HMRC pay on the repayment?

HMRC pays £105. Interest on overpaid tax is 3.50% a year, and it applies only to the £6,000 repaid, for six months: £6,000 × 3.5% × 6/12. The £60,000 total paid is irrelevant to the calculation.

  1. A£105Correct
  2. B£255
  3. C£210
  4. D£113

Explanation

Overpaid tax earns 3.50% a year. £6,000 × 3.5% × 6/12 = £105. £255 uses the 8.50% underpaid rate. £210 uses a full year. £113 uses the official rate of 3.75% (£112.50).

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