ACCA Applied Skills · Taxation (UK) · Payment of inheritance tax
Owen died on 30 September 2025. Inheritance tax of £40,000 on his estate was due on its normal due date but was paid exactly six months late. Using the interest rates given in the tax tables, what is the interest charged?
The interest is £1,700. Tax paid late carries interest at the underpaid rate of 8.5% from the due date. Six months late on £40,000 gives £40,000 × 8.5% × 6/12 = £1,700. The 3.5% overpaid rate is not used for late payment.
- A£700
- B£750
- C£1,700Correct
- D£3,400
Explanation
Death was on 30 September 2025, so the tax was due on 31 March 2026. It was paid six months late, on 30 September 2026. Interest on underpaid tax is 8.5%, so the interest is £40,000 × 8.5% × 6/12 = £1,700. The figure of £700 wrongly uses the 3.5% rate on overpaid tax.
Did you get it right without looking?
One question tells you little. A timed set on Payment of inheritance tax shows your real accuracy, how long you take and where you lose marks.
More Payment of inheritance tax questions
- Priya made a chargeable lifetime transfer of £405,000 to a discretionary trust in June 2025, after annual exemptions. She had made no earlie…
- Mehmet died on 15 March 2026. His estate included a freehold office building on which the inheritance tax (IHT) was £300,000. His executors …
- Quinn made a chargeable lifetime transfer of £525,000 to a discretionary trust on 1 July 2018, after exemptions, having made no earlier tran…
- 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 …
- Which rate of interest applies to inheritance tax that is paid late, according to the Finance Act 2025 rates of interest given in the tax ta…
- Dev's executors submitted an IHT account that understated the tax due. HMRC found the error to be careless, and the executors made a prompte…