At a time when bereaved families already have so much to manage, the prolonged delays in the issue of Grants of Probate is not only costing time but, in some cases, money. Interest arises on tax which is paid after the Revenue’s deadline. Where assets within an estate cannot be used to pay tax before a Grant is issued, delays in the Grant being issued is leading families to unavoidably incur high interest rates on the unpaid tax.
HM Courts and Tribunals Service indicate that families can currently expect a wait of sixteen weeks for the issue of Grant of Probate, but in some cases this timeframe is extending beyond six months. HM Revenue and Customs have recently increased the rate of interest on taxes paid late, to 7.75 per cent, an unattractive rise for those families impacted by the delays and where the equivalent estate asset values do not appear to be rising.
Efforts have been made to ease the release of assets to settle the inheritance tax due, such as direct tax payment schemes offered by certain banks but, for those estates where inheritance tax is due and cannot be paid before the Grant of Probate is issued, interest will start to accrue on the tax due.
The Society of Trust and Estate Practitioners (‘STEP’) have highlighted the concerns of many experts as to the impact this may have on bereaved families. In their recent article, STEP cited the concerns raised by industry expert Gill Steel TEP. She has pointed to the particular difficulties for estates where the main value is represented by the family home.
Where the principal asset in an estate is a home worth £1,500,000 there will be no easy way to pay the tax due on death. At the current interest rate of 7.75%, the potential Inheritance Tax bill of £470,000 would trigger interest charges of £36,425 over a year during which the interest cannot be paid after the tax deadline has passed. With fluctuating property markets, this may become a more frequent occurrence.
Some practitioners and STEP supports a call for HMRC to delay charging interest in certain circumstances.
No doubt, consideration of any methods to alleviate a further financial burden at an already distressing time would be welcomed by bereaved families.
How can Tozers help?
For any support with taxes or later life planning. please talk to our dedicated Later Life Planning team, who will be happy to provide advice and support.