Rising rates make Inheritance Tax instalment system unaffordable

The Telegraph details how rising interest rates have made paying inheritance tax in instalments much more expensive. Families are allowed to settle IHT bills in ten instalments with interest in order to avoid selling properties to meet HMRC’s rule of settling the 40% duty within six months of death. Bills were split into 10 payments with interest paid at the Bank of England rate plus 2.5 percentage points. But with rates rising to 1.25%, a family inheriting a £1m property from an unmarried relative will pay £33,750 over 10 years on their £200,000 bill, compared with £23,400 at a rate of 0.1%. If the Bank Rate rose to 3%, as predicted by JP Morgan, a family would be faced with close to £50,000 in interest on their 10-year IHT payment plan – more than double the amount compared to last year, according to calculations from advisers NFU Mutual. Sean McCann of the firm said: “As the cost of HMRC interest payments rises, many families will find them unaffordable and will be forced to sell.”

The Daily Telegraph

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