How to Pay Inheritance Tax UK (2026): All Methods, Deadlines & the 6-Month Rule

Inheritance tax on a UK estate must be paid by the end of the sixth month following the month in which the death occurred. For example, if the deceased died on 15 March 2026, IHT must be paid by 30 September 2026 (six months after March). This is the 'six-month rule' under section 226 of the Inheritance Tax Act 1984 (IHTA 1984). Interest accrues automatically on unpaid IHT from the due date — the current HMRC interest rate on late IHT is 7.75% per annum (as of 2026). The six-month rule creates a practical problem: the executor cannot normally obtain a grant of probate without first paying IHT, but most estate assets (bank accounts, property, investments) cannot be accessed without the grant. This is the 'IHT catch-22'. The solutions are: the HMRC Direct Payment Scheme (banks transfer direct to HMRC before probate); a probate loan; liquidating any assets that do not require probate to access (premium bonds up to £5,000, ISAs with the provider's consent, NS&I); using the executor's own personal funds (recoverable from the estate on distribution). For assets qualifying for the instalment option (see below), 10% of the IHT attributable to those assets can be paid over 10 years — the first 10% instalment is due at the six-month point. IHT on lifetime transfers (chargeable lifetime transfers that the donor survived less than 7 years) has different due dates depending on when the transfer was made.

The HMRC Direct Payment Scheme (DPS) allows UK banks and building societies to transfer funds from the deceased's accounts directly to HMRC to pay IHT — before a grant of probate has been obtained. This solves the IHT catch-22: the executor can pay the IHT using the estate's bank funds, receive a receipt from HMRC (called a D18 receipt), and then use the D18 receipt as part of the probate application, obtaining the grant of probate, which is then used to administer the rest of the estate. To use the Direct Payment Scheme: (1) the executor completes the IHT400 form and calculates the IHT liability; (2) the executor contacts each participating bank or building society (most major UK banks participate — confirm with the specific bank) and requests that funds be transferred to HMRC under the DPS; (3) the executor provides the bank with the IHT reference number (obtained from HMRC in advance using Form IHT422), the amount to be paid, and evidence of their appointment as executor (typically the will and proof of identity); (4) the bank transfers the funds directly to HMRC; (5) HMRC issues the D18 receipt confirming payment; (6) the executor submits the IHT return with the D18 receipt and obtains the grant of probate. Important limitations: the DPS only applies to banks and building societies — other assets (shares, property, NS&I, pension death benefits) cannot be used via the DPS; some banks have minimum/maximum thresholds; the bank requires certainty about the executor's identity and authority. For NS&I (Premium Bonds and savings), a similar scheme exists: NS&I can release funds to pay IHT direct.

Under section 227 of the IHTA 1984, IHT attributable to certain qualifying assets can be paid by 10 equal annual instalments rather than in full at the six-month deadline. Qualifying assets include: (1) Land and buildings (including a house) — whether freehold or leasehold, in the UK or overseas; (2) Business or interest in a business — including a sole trader business or a share in a partnership; (3) Unquoted shares and securities — shares in a private company (not listed on a recognised stock exchange); (4) Shares in a quoted company, but only where the holding is a controlling interest (more than 50%) or where paying the tax immediately would cause undue hardship; (5) Trees and timber where heritage conditions apply. The first instalment is due at the six-month deadline. Subsequent instalments are due on each anniversary. Interest is charged on outstanding instalments from the date each becomes due. If the qualifying asset is sold before all instalments are paid, any outstanding IHT on that asset becomes payable immediately from the sale proceeds. For a property that is part of the estate and is eventually sold to distribute funds to beneficiaries, the outstanding IHT must be repaid at that point — the instalment option does not permanently defer the tax, it only defers payment until sale (unless all 10 instalments are paid before the sale). Instalments are a useful cash-flow tool for asset-rich, cash-poor estates (such as farming families) but should not be relied upon as a permanent deferral strategy.

Yes — the acceptance in lieu (AIL) scheme, operated by the Arts Council England in partnership with HMRC, allows executors to offer certain qualifying cultural, heritage, and scientific property to public collections in lieu of paying IHT in cash. The property offered must be of 'pre-eminent' quality — that is, exceptional in relation to its type nationally. Examples of accepted items include: paintings and works of art; archives, books, and manuscripts; land and buildings of architectural or historic importance; wildlife habitats; and scientific collections. The process: (1) the executor applies to Arts Council England via the HMRC AIL offer form; (2) Arts Council arranges an independent expert valuation; (3) the value of the accepted property is set off against the IHT liability; (4) the property is allocated to an appropriate public institution (museums, libraries, archives, historic buildings trusts). The AIL scheme provides a 'douceur' — the property is valued for AIL purposes at approximately 25% above its likely open market sale price (reflecting the cultural benefit). The scheme is therefore financially advantageous: accepting a painting worth £100,000 at AIL value of £125,000 reduces the IHT liability by £125,000 instead of the £100,000 the executor would have obtained by selling the painting and paying IHT from the proceeds. The scheme is voluntary — HMRC cannot compel an executor to use it. AIL is a lengthy process (typically 6–12 months) so parallel IHT payment arrangements may be needed to avoid late payment interest.

If the full IHT liability cannot be paid within 6 months of the end of the month of death, interest accrues automatically on the outstanding amount at HMRC's current late payment rate — 7.75% per annum as of 2026. This is a significant rate: on an unpaid IHT liability of £100,000, interest accrues at £7,750 per year. HMRC does not typically send reminders or bills for IHT interest — it is calculated automatically and added to the liability when the estate account is settled. If the estate genuinely cannot pay IHT in time because the assets are illiquid (for example, the estate consists mainly of property that takes many months to sell), the executor should: (1) Apply the instalment option for property and business assets where eligible; (2) Use the HMRC Direct Payment Scheme for any liquid bank funds; (3) Consider a probate loan — commercial lenders specialise in estate administration loans, typically charging interest of 0.5–1.5% per month, secured against the estate's assets; (4) Contact HMRC's Inheritance Tax team to discuss the situation — HMRC has discretion in exceptional circumstances, though it rarely waives interest. There is no formal IHT penalty regime for late payment per se (unlike income tax) — the sanction is purely the daily accrual of interest. However, executors who deliberately delay paying IHT or who fail to file the IHT return on time (within 12 months of the end of the month of death) face penalties under the Finance Act 2009 Schedule 55 (failure to file return) and Schedule 56 (failure to pay on time).

Before submitting the IHT return (Form IHT400 for taxable estates, IHT205 for excepted estates), the executor must obtain an Inheritance Tax reference number from HMRC. This is done by submitting Form IHT422 ('Application for an IHT reference') online via HMRC's estate returns service at gov.uk/valuing-estate-of-someone-who-died. The reference number is required on all correspondence with HMRC about the estate and must be quoted when making IHT payments. Process: (1) Obtain the IHT reference number (IHT422 — can be done online, takes a few days); (2) Gather all estate asset values (bank accounts, property, investments, pension death benefits from April 2027, business interests, foreign assets); (3) Calculate reliefs and exemptions (spouse exemption, NRB, RNRB, charity exemption, BPR, APR); (4) Complete IHT400 (for taxable estates) with the relevant supplementary schedules — IHT401 (domicile), IHT402 (NRB transfer), IHT403 (gifts), IHT404 (jointly owned assets), IHT405 (houses, land), IHT406 (bank accounts), IHT407 (household goods), IHT408 (quoted stocks and shares), IHT409 (pensions), IHT410 (life insurance), IHT411 (listed investments), IHT412 (unlisted investments); (5) Pay the IHT or use the DPS to transfer from bank accounts; (6) Submit IHT400 to HMRC Inheritance Tax; (7) HMRC confirms the calculation and issues a clearance certificate when all IHT is settled. The IHT return must be submitted within 12 months of the end of the month of death to avoid late filing penalties.

Inheritance tax planning using lifetime gifts is one of the most widely used IHT reduction strategies, but the tax consequences depend on the type of gift and how long the donor survives after making it. The seven-year rule: a gift that is a potentially exempt transfer (PET) — including cash gifts, non-exempt gifts of assets, and most transfers into bare trusts — becomes completely exempt from IHT if the donor survives 7 years from the date of the gift. If the donor dies within 7 years, the gift is brought back into the estate for IHT calculation ('failed PET'). Taper relief reduces the IHT on a failed PET if the donor survived 3–7 years: 3–4 years: 80% of full IHT; 4–5 years: 60%; 5–6 years: 40%; 6–7 years: 20%; 7+ years: 0%. Annual exemption: each individual can give away £3,000 per year (the 'annual exemption') completely free of IHT — unused amounts from the previous year can be carried forward once. Small gifts: gifts of up to £250 per person per tax year are exempt. Normal expenditure out of income: regular gifts from surplus income (not capital) can be IHT-exempt if they represent a pattern of giving from normal expenditure. Wedding gifts: £5,000 from a parent, £2,500 from a grandparent, £1,000 from anyone else. All of these affect the IHT calculation in the estate — the executor must report all gifts made in the 7 years before death on Form IHT403 and calculate whether any failed PETs create an IHT liability.