Kieran Bowe, a legal expert from the law firm Russell-Cooke, has brought attention to the growing problem of interest on inheritance tax bills surpassing the income from property portfolios within estates. This has caught many families off guard.
Since 2008, interest on inheritance tax had not been a major concern. However, rates have significantly increased, leaving families struggling to manage the financial burden.
In a similar vein to how banks tend to withhold rate increases from savers while benefiting from rising borrowing costs, HMRC offers a lower interest rate to taxpayers compared to the rate it charges for late payments.
The interest on late payments is set at the Bank Rate plus 2.5 percentage points, while the rate on tax repayments is set at the Bank Rate minus 1 percentage point.
The Chartered Institute of Taxation, a reputable trade body, has previously called on the Government to address the “unfair” gap between the interest rates charged and paid to taxpayers.
An HMRC spokesperson clarified their stance, stating, “We aim to provide support to customers who require assistance with tax debt while taking appropriate action against those who fail to engage or refuse to pay. If a customer cannot afford the amount deducted from their tax code, they can always contact HMRC to explore alternative options for resolving the debt.”
The spokesperson further added, “The interest rates charged and paid are fair and prevent individuals from overpaying their taxes to secure higher interest rates than what is available commercially. Additionally, late payers do not gain an unfair financial advantage over those who pay on time.”
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