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

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 tables?

Late-paid inheritance tax carries interest at 8.50% a year, the rate for underpaid tax. The official rate relates to beneficial loans, the overpaid rate applies to repayments by HMRC, and the VAT penalty percentages do not apply to IHT interest.

  1. A8.50%, the rate on underpaid taxCorrect
  2. B3.75%, the official rate of interest
  3. C3.50%, the rate on overpaid tax
  4. D6%, the late payment rate for VAT

Explanation

Late-paid IHT is underpaid tax, so the 8.50% underpaid rate applies. The official rate of 3.75% applies to benefits such as beneficial loans. The 3.50% rate is paid by HMRC on overpaid tax. The 6% figure is a VAT penalty and has no application to IHT interest.

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