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While interest often accrues on overdue tax, the late payment of certain taxes may also attract a Penalty. For information on the interest accruing on overdue tax, see Practice Notes: IHT—payment deadlines on death—Interest on IHT and Interest on late paid tax.

There are a number of late payment penalty regimes in place across the various taxes. This Practice Note considers penalties on late paid Inheritance tax (IHT), noting that there is currently no IHT penalty regime in force.

Finance Act 2009 (FA 2009) introduced a late payment penalty regime that was intended to harmonise the Rules for the different taxes. This is being introduced in stages and while it applies to many taxes, it does not yet apply to overdue IHT. It is worth noting that the late payment penalty regime in relation to income tax self-assessment and VAT is being replaced by a new Sanctions regime introduced by Finance Act 2021 with effect from various dates from 1 January 2023 onwards depending on the type of taxpayer. For further information, see News Analysis: Spring Budget