HMRC: Updates UK Inheritance Tax Interest Rates for 2024

• HMRC has updated its guidance on Inheritance Tax thresholds and interest rates, detailing changes from October 1988 onwards.
• Inheritance Tax late payment interest rates have seen multiple adjustments, with rates ranging from 6.5% in early 2023 to 8.25% by May 2025.
• Inheritance Tax repayment interest rates have also been revised, moving from 3% in early 2023 to 3.25% by May 2025.
• The UK Inheritance Tax thresholds, including the nil rate band, are now confirmed to remain at current levels until April 5, 2030, with guidance extending to April 5, 2031.
• These frequent updates necessitate careful attention for accurate estate planning and compliance with HMRC regulations.

The prolonged stability of the Inheritance Tax nil rate band, now confirmed until April 5, 2031, offers a clearer horizon for long-term financial planning, allowing for more predictable assessments of potential IHT exposure.

HMRC has recently issued comprehensive updates to its guidance concerning Inheritance Tax (IHT) thresholds and associated interest rates. This revised information, which traces IHT nil rate bands back to 1914 and details interest rate adjustments since October 1988, is crucial for understanding current and future tax obligations. The updates specifically highlight numerous changes to both late payment and repayment interest rates, alongside significant extensions to the duration of existing Inheritance Tax thresholds.

These revisions are designed to provide clarity for taxpayers and their advisors, enabling more precise calculations of IHT liabilities and potential interest accruals. The guidance also references an updated 'Calculate Inheritance Tax interest tool' to assist users in determining the interest due on IHT payments.

The past year has seen a series of adjustments to HMRC Inheritance Tax interest rates, impacting both underpayments and overpayments. For late payments, the rate was set at 6.5% from February 21, 2023, increasing to 6.75% from April 13, 2023, and then to 7% from May 31, 2023. A further rise saw the rate reach 7.75% from August 22, 2023. Looking ahead into 2024, the late payment rate will be 7.50% from August 20, 2024, followed by 7.25% from November 26, 2024. The guidance also noted a general update for late payment rates in April 2025. Subsequent increases are scheduled, with the rate at 7% from February 25, 2025, 8.25% from May 28, 2025, 8.00% from August 27, 2025, 7.75% from January 9, 2026, and finally 8.00% from November 24, 2026.

Concurrently, Inheritance Tax repayment interest rates have also undergone several changes. From February 21, 2023, the repayment rate was 3%, rising to 3.25% from April 13, 2023, and 3.5% from May 31, 2023. It then increased to 4.25% from August 22, 2023. For 2024, the repayment rate will be 4.00% from August 20, 2024, and 3.75% from November 26, 2024. Future rates include 3.5% from February 25, 2025, 3.25% from May 28, 2025, 3.00% from August 27, 2025, 2.75% from January 9, 2026, and 3.00% from November 24, 2026. An amendment was also made to a specific period in the 'Inheritance Tax interest rates from October 1988' table, changing "20 August 2024 to 25 November 2025" to "20 August 2024 to 25 November 2024."

Beyond the dynamic interest rates, the guidance also provides critical updates regarding UK Inheritance Tax thresholds. Initially, the Inheritance Tax threshold and the additional threshold, also known as the residence nil rate band, were slated to remain at their current levels until April 5, 2028. However, this duration has been extended.

The updated guidance now specifies that these thresholds will be maintained at their present values until April 5, 2030. Furthermore, the document now explicitly includes the Inheritance Tax threshold up to and including April 5, 2031, offering a longer-term view for estate planning. This stability in the Inheritance Tax nil rate band provides a consistent framework for individuals and their advisors planning for future estates.

These extensive updates to HMRC Inheritance Tax interest rates and the extended Inheritance Tax thresholds 2031 have significant implications for estate planning, probate, and tax compliance. The frequent adjustments to Inheritance Tax late payment interest and Inheritance Tax repayment interest rates underscore the importance of timely and accurate tax management. Professionals advising on estates must remain vigilant about these fluctuating rates to correctly calculate client liabilities and advise on optimal payment strategies.

The prolonged stability of the Inheritance Tax nil rate band, now confirmed until April 5, 2031, offers a clearer horizon for long-term financial planning, allowing for more predictable assessments of potential IHT exposure. Ensuring compliance with HMRC regulations requires a thorough understanding of these updated figures and their effective dates.

Lawyers advising on estate planning, probate, or tax compliance must be aware of the updated Inheritance Tax thresholds and interest rates for late payments and repayments, including future changes, to accurately calculate client liabilities, advise on payment strategies, and ensure compliance with HMRC regulations.

Source: Original reporting via GOV.UK guidance