When and how do you pay inheritance tax?
Guidance on the timing and process of paying inheritance tax, covering penalties and ways to cover an IHT bill.
When Do You Pay Inheritance Tax?
Deadlines, Methods and What to Do If You Can’t Pay
Inheritance Tax (IHT) is a crucial consideration for anyone dealing with an estate after someone passes away. Understanding when it must be paid, how to pay it, and what options are available when funds are tied up can help executors and beneficiaries manage the process more smoothly and avoid costly penalties.
Important: HMRC’s late payment interest rate has recently increased from 7% to 7.75% since Feb 2025. Paying on time is more important than ever.
When does inheritance tax have to be paid?
IHT must generally be settled within six months from the end of the month in which the person died, as set out in HMRC guidance. Missing this deadline means HMRC will begin charging interest on the outstanding amount — currently at 8.5% for late payments, recently increased from 7%.
IHT must be paid before the estate can be distributed to beneficiaries. The type of assets in the estate and how they are being transferred affects exactly when payment is due.
Do you have to pay inheritance tax before probate?
In short, yes — at least partially. IHT typically needs to be paid before the probate process can be completed and the estate distributed. Executors often face difficulties when estate funds are locked in property or investments that cannot be accessed until probate is granted — creating the classic catch-22.
In certain circumstances, HMRC may allow a Grant on Credit, permitting the estate to be administered and IHT paid at a later date. This is not available in all cases and should be discussed with a solicitor.
How to pay inheritance tax
There are four main methods available to executors for settling an IHT bill:
- Use the deceased’s bank account
Many UK banks will release funds directly to HMRC if provided with:- A copy of the death certificate
- An IHT423 form
- HMRC’s payment reference number
This is often the simplest route when the deceased held sufficient liquid funds.
- Use personal funds and reclaim later
If estate assets are tied up, executors or family members can pay from their own funds and reimburse themselves from the estate once probate is granted. This requires good documentation and trust among those involved. - Pay in instalments
If most of the estate consists of property or land, HMRC may allow IHT to be paid in up to 10 annual instalments. The first payment is due within six months of the death. Interest accrues on the unpaid balance after the first instalment, and this option is only available for certain asset types — primarily property. - Apply for an inheritance tax loan
If liquid funds are not available and bank assets cannot be released quickly, a short-term IHT loan — such as Level’s IHT Loan — allows executors to pay HMRC directly. The loan is repaid from estate proceeds once assets are released, with no personal liability to the executor.
When must IHT be paid on different assets?
| Asset type | Payment method | Key notes |
|---|---|---|
| Property and physical assets | Instalments over up to 10 years, or lump sum | Interest accrues on outstanding balance. See HMRC property and IHT guidance. |
| Cash and liquid assets | Direct payment from the deceased’s bank account to HMRC | Often the quickest and simplest method if funds are available. |
| Investments and other holdings | Can be used to settle IHT, but access may take time | Some investments may need to be liquidated first, which takes time and may affect value. |
What other taxes are due when someone dies?
Beyond inheritance tax, several other taxes may arise when dealing with an estate:
- Income tax — on any earnings the deceased received up to the date of death.
- Capital gains tax — if assets are sold at a profit before the estate is fully settled.
- Ongoing property taxes — if properties remain unsold for a period after death, council tax and other charges may continue to accrue.
What if there are no available funds to pay IHT?
One of the most common challenges executors face is needing to pay IHT when the estate’s funds are tied up in assets that are not immediately accessible — particularly property. This can delay the probate process and result in accumulating interest charges from HMRC.
Options available include applying for HMRC instalment payments (for property-heavy estates), using an IHT loan, or — where eligible — applying for a Grant on Credit. In all cases, taking early advice from a solicitor is recommended to identify the most appropriate route.
