New Government tax legislation will force bereaved families to rush their grieving period or face heavy interest payments.
Relatives of a deceased person are required to pay 40% inheritance tax on estates worth over £325,000 after which, interest is levied.
The current interest rate for failing to pay an inheritance tax bill sits at 0%, after being influenced by the 0.5% Bank Rate, set last year. But under new Government ruling, failure to pay inheritance tax within six months of loss, will see grieving families hit by a 3% rate hike.
From next month, late payments will be charged at a rate of 2.5 per cent above the Bank Rate, while the interest paid on overpayments will be made at 1 per cent below the Bank Rate, in a move dubbed “harmonizing” by the Government.
Inherited estates may now have to be sold at break neck speed to avoid being hit by the interest hike, but under current economic and housing market conditions that may prove difficult for poorer individuals.
“We do not choose when we die. Executors may find themselves having to raise funds to pay the tax in unfavourable market conditions. This can be a particular problem with property,” said Mike Warburton, of accountants Grant Thornton.
The move, which could net the “cash-strapped” Government up to £10million, has been branded ‘unfair and unbalanced’ by accountants and other experts.
“Susie Squire, of campaign group Taxpayers Alliance, said: “it is a desperate move from the Government, which reflects the shambolic state of the public finances in our country.”
“They are clearly putting up the rate to feed this Government’s addiction to debt, tax and spending.”
For assistance on Wills Probate and Inheritance issues contact David Farr or Keith Darvil at kenneth elliott + rowe