What Does the Bank of England Interest Rate Increase Mean for You?

The Bank of England has increased its base rate from 3.5% to 4% on 5 November 2026.

While much of the attention will focus on mortgages and borrowing costs, the increase may also have significant implications for those dealing with estates and Inheritance Tax liabilities.

Buying a Home or Remortgaging

For anyone looking to purchase a property or remortgage an existing home, the increase in the base rate is likely to influence mortgage pricing.

Although lenders do not automatically match the Bank of England rate, increases in the base rate often lead to higher mortgage costs, particularly for those on variable rate products. Fixed-rate mortgage pricing may also be affected depending on market expectations.

If you are considering moving home, purchasing an investment property, or remortgaging, it may be sensible to review your options sooner rather than later and take advice on the products currently available.

Inheritance Tax and Interest Charges

The increase also has important consequences for estates where Inheritance Tax is payable.

Inheritance Tax is generally due six months after the end of the month in which the deceased died. If payment is not made by the due date, HMRC will charge interest on the outstanding balance.

As HMRC’s late payment interest rate is set at 4% above the Bank of England base rate, the increase means that interest on unpaid Inheritance Tax will rise from 7.5% to 8%.  This rise will take effect from 24 November 2026.

If an estate has an outstanding Inheritance Tax liability of £100,000, the interest charge over the course of 12 months would be approximately £8,000.

What If Too Much Tax Has Been Paid?

Where an estate has overpaid Inheritance Tax and a refund becomes due, HMRC will also pay repayment interest.

Following the increase in the base rate, repayment interest will rise to 3%, being 1% below the Bank of England base rate.

Planning Ahead

Rising interest rates can increase the overall cost of estate administration where Inheritance Tax remains outstanding for an extended period.

Executors and personal representatives should therefore consider the timing of tax payments carefully and seek advice at an early stage.

Similarly, anyone considering a property purchase, sale, or remortgage may wish to review their financing arrangements and obtain up-to-date advice on the options available.

If you would like advice on estate administration, Inheritance Tax, conveyancing, or remortgaging, both our Wills, Trusts & Probate team and our Residential Conveyancing team will be happy to help.

You can get in contact via the form below or by emailing [email protected].

This article was written by Sian Lias, Partner and Head of Wills, Trusts and Probate department in our Basingstoke office. With assistance from Partner and Head of Residential Property Kate Atkinson.