Inheritance tax: Warning to Britons as HMRC hits bereaved families with unexpected new costs

The new levy is at a 15-year high. A revised rate will come into force on Tuesday in a move which is 2.5 per cent above the Bank of England’s base rate.

The taxman in comparison is only obliged to cough up four per cent on money owed the Britons.

The surging rate will likely come as a shock to late payers as the charge on overdue tax stood at just 2.75 per cent in January 2022.

More than 730,000 taxpayers were reportedly in Time to Pay arrangements at the end of 2022.

Time to Pay arrangements ensure Britons who cannot pay their tax bill on time arrange to do so over an agreed time frame.

They are also required to pay extra cash in interest.

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However, HMRC can decide to tax up to half of an individual’s gross income via their tax code if they fail to engage.

Dawn Register, from the accountancy firm BDO, said: “This would be very unwelcome to most taxpayers and could seriously affect someone’s ability to meet their living costs.”

Delays to probate registries have added an additional difficulty for bereaved Britons.

Families are being forced to wait for months before they can obtain the legal document, known as grant of probate, needed to sell the deceased’s property and wrap up the estate.

This has even been known to result in families missing the inheritance tax deadline.

The 40 per cent inheritance tax levy must be paid within six months of the benefactor’s death.

An additional interest can be charged on the unpaid tax if Britons miss the deadline.

An HMRC spokesman said: “Our approach to tax debt remains to support those who need it and take action where customers do not engage or refuse to pay.

“If a customer cannot afford the amount being taken via their tax code, they can still contact HMRC to discuss what other options may be available to resolve the debt.

“The interest we charge and pay is fair. It ensures people are not encouraged to overpay their tax to secure a higher interest rate than available commercially, while those paying late don’t get an unfair financial advantage over those paying on time.”