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Legal News | 17.08.23

Interested in Probate delays and inheritance tax?

Associate Solicitor, Beth Williams writes that there is no escaping it: Alongside small talk about the UK’s blink-and-you’ll-miss-it summer, or through relentless BBC news alerts, there, centre-stage, is the Bank of England’s latest increase in interest rates. Of course, this increase has major consequences for those with mortgages or those renting, with landlords often opting to increase rents in line with interest rates… but there are plenty of other consequences, too.

One such consequence is faced by those applying for a Grant of Probate in relation to a deceased’s estate. HM Revenue and Customs has increased the rate of interest it charges on tax paid late (linked to the Bank of England base rate) to 7.75% meaning that, if inheritance tax (“IHT”) is paid late, the interest bill for that late payment will be higher.

You may think a penalty in the form of interest for late payment is absolutely fair but there are plenty of legitimate reasons why IHT might be paid late. The deadline for payment before interest begins to accrue is the last day of the sixth month following death. This is not a particularly long stretch of time, especially given some institutions take several months to respond to correspondence, which might reveal assets or liabilities in the estate which must, in turn, be declared.

Executors may also find themselves in a position where there is no choice but to incur interest on IHT due. In this often-encountered scenario:

  • The deceased’s largest value asset was property;
  • There are insufficient liquid assets to settle the full IHT bill on death; and
  • The property cannot be sold to realise cash without a Grant of Probate and, in turn, a Grant of Probate will not be issued until the IHT payable on submission of the IHT Return has been settled.

As a result, the executors must opt to pay IHT attributable to the property in instalments (which will be subject to interest where paid beyond the six month mark), in order to (1) obtain the Grant of Probate required to sell the property and (2) in turn, use the Grant of Probate to sell the property and generate the cash required to settle the IHT.

What compounds this problem is the time taken by the Probate Registry to issue a Grant of Probate. The Probate Registry estimates it takes around 16 weeks for them to issue a Grant of Probate after the application has been saved to their system. With the time taken for the application to be saved and postal times taken into account, some applications are taking up to six months before a Grant of Probate is issued. As mentioned above, the Grant may be required to sell estate property in order to release funds to pay IHT (and stop further interest accruing).

The Society for Trust and Estate Practitioners (of which several Wansbroughs solicitors are a part) has supported calls to delay the charging of interest by HM Revenue and Customs* but we will wait to see whether any changes are made.

If you require assistance navigating the payment of IHT payable on a deceased’s estate or are concerned about the delays mentioned above, please do get in touch with us at wealth@wansbroughs.com and we will be happy to assist you.

* https://www.step.org/industry-news/rapidly-increasing-late-payment-interest-charges-put-focus-probate-delays


Posted By Our Wills, Tax, Trusts & Probate Team