IHTM30341 - Interest: introduction
As a general rule, interest on unpaid tax is payable from the day after the date when the tax becomes due (IHTM30151). This is outlined at IHTA84/S233 and IHTA84/S236 (1).
If tax is underpaid, IHTA84/S233 and IHTA84/S240 provide that we charge interest on the underpaid amount.
When overpaid tax or interest is repaid, there are two separate aspects:
- if too much interest has been paid, the excess is repayable (IHTM31601)
- repayments of tax or interest carry interest from the date of the overpayment to the date the repayment order is issued. This is commonly known as ‘interest supplement’ (IHTM31665).
Up to 28 September 2009 supplementary interest was repaid at the same rate as the tax outstanding, would have carried interest.
On 29 September 2009 the rates for charging interest and repaying supplementary interest on Inheritance Tax were brought into line with the rest of HMRC. From this day onwards they follow the Bank of England base rate.
From 29 September 2009 to 5 April 2025 interest was charged on any overdue tax at the current Bank of England base rate plus 2.5%. From 6 April 2025 interest is charged on any overdue tax at the current Bank of England base rate plus 4%.
Supplementary interest due on any tax and interest that has been overpaid will be paid at Bank of England base rate minus 1%, although this will be subject to a minimum rate of 0.5%.
For details of the rates for charging interest and repaying supplementary interest see IHTM30352.
Supplementary interest is given even though for part of the period in question interest would not have been charged on unpaid tax because it had not yet become due.