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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.

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.

• Interest rates on overdue Inheritance Tax Opens new window

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 1 - 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 2 - find out the interest rate for the period over which you have been unable to pay the Inheritance Tax in full.

Step 3 - 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 and finish on 10 November 2007, with an interest rate increase on 6 August.

You work out the interest as follows:

From 1 July to 5 August 2023

Step 1 - number of days: 36 (31 in July, 5 in August)

Step 2 - interest rate: 4 per cent

Step 3 - interest due: £5,000 x 4 per cent x 36 ÷ 366 = £19.67

From 6 August to 10 November 2023

Step 1 - number of days: 97 (26 in August, 30 in September, 31 in October, 10 in November)

Step 2 - interest rate: 5 per cent

Step 3 - interest due: £5,000 x 5 per cent 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 Opens new window

Interest when paying Inheritance Tax in instalments

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

• Interest charges on Inheritance Tax paid in yearly instalments

More useful links

• When Inheritance Tax is due - payment deadlines

• When penalties are charged - a guide Opens new window

Useful contacts

• Probate and Inheritance Tax Helpline