Two deadlines, six months apart — and only one of them starts the interest.
Inheritance tax is due by the end of the sixth month after the month of death, but the account reporting it is not due until 12 months after the end of that month. The two dates are routinely collapsed into one, and collapsing them is expensive: interest attaches to the earlier date, so an estate can be entirely on time with its paperwork and still be six months into an interest charge.
From the day after that payment deadline, HMRC charges 7.75% a year on whatever remains unpaid. The rate is not a fixed statutory number — it is the Bank of England base rate plus 4 percentage points, so it moves whenever the base rate moves. With the base rate at 3.75%, that gives 7.75%.
Interest on inheritance tax is simple, not compound, and it is not a penalty — it is charged automatically, without a decision by anyone, for every day the tax sits unpaid. Late delivery of the IHT400 account is a separate matter with its own penalties.
An estate owes £40,000 in inheritance tax and the executor pays it 120 days after the deadline. The delay is not anyone's fault — the house had not sold, and there was no other cash in the estate. The interest is charged anyway.
Where the interest works differently.
Some property can be paid for in 10 equal annual instalments rather than in one sum. It covers land and buildings, a controlling shareholding, unlisted shares above £20,000 meeting the statutory tests, and a business run for profit — the assets an executor cannot readily turn into cash by the six-month point.
The first instalment falls due on the same date as everything else — the end of the sixth month after the month of death — and it carries no interest unless it is paid late. From the second instalment onward, interest is charged on the balance still outstanding.
One further change applies from 6 April 2026: where newly inherited assets qualify for Agricultural or Business Relief, the instalments are interest-free while the asset qualifies. A late instalment still accrues interest from its due date to the date it is paid.
The instalment option ends if the asset is sold. Selling the property brings the whole remaining balance due at once, which is the trap that catches executors who elect for instalments and then accept an offer on the house six months later.
Instalment rules and qualifying assets: GOV.UK — Paying inheritance tax in yearly instalments ↗. Payment deadline: GOV.UK — Paying inheritance tax ↗.
Informational, not advice. Confirm against GOV.UK before acting. Figure verified 22 Aug 2026.
Cite this figure: Valoren, “HMRC Interest on Late Inheritance Tax,” https://valoren.uk/figures/iht-interest-rate (verified 22 Aug 2026).