IHT During Estate Administration: When Inheritance Tax Is Due, Paying Before Probate, and the Instalment Option
IHT must be paid 6 months after death — before you can get probate. But you can't access the estate until probate is granted. The solution: HMRC's Direct Payment Scheme lets banks pay IHT directly from the deceased's accounts. Land and business assets can be paid in 10 annual instalments.
IHT During Estate Administration
When is inheritance tax due? The primary IHT due date
Inheritance tax is due on the 'primary due date' — which is 6 months after the end of the month in which the death occurred. For a death on any day in January 2026, IHT is due by 31 July 2026 (6 months after 31 January 2026). For a death in June 2026, IHT is due by 31 December 2026. HMRC issues an IHT reference number (which must be obtained in advance by submitting form IHT422) and the IHT is paid to HMRC using that reference. The primary due date applies to all IHT except the instalment option IHT (which follows a different timetable). Note: the personal representative is not required to wait for probate to be granted before paying IHT — indeed, probate cannot be obtained until at least some IHT has been paid.
The probate catch-22: paying IHT before you have probate
There is a practical problem in estate administration: the executor cannot access the estate's assets (bank accounts, investments, property) until the grant of probate is obtained. But probate cannot be obtained until IHT has been paid (or at least the IHT on non-instalment assets has been cleared). This creates a catch-22: the money to pay IHT is locked in the estate, but IHT must be paid to unlock the estate. Several solutions exist: (1) HMRC's Direct Payment Scheme (DPS): most banks and National Savings will pay IHT directly to HMRC from the deceased's accounts without requiring probate first — the executor instructs the bank to make a payment directly to HMRC against the estate's IHT reference. The bank transfers the funds directly. This is the most common solution and usually available where the deceased's accounts have sufficient funds. (2) Inheritance tax loan: specialist short-term loans are available for executors to pay IHT where the estate's cash is insufficient or inaccessible before probate. The loan is repaid from estate assets once probate is granted. (3) Selling assets before probate: for some assets (UK government stocks/gilts, National Savings, some investments), the executor can sell without probate and use the proceeds to pay IHT. (4) Instalment option: where IHT on land, business assets, or unquoted shares qualifies for the instalment option, the executor only needs to pay the first instalment before probate — reducing the immediate cash burden.
The instalment option: paying IHT in 10 annual payments
Sections 227–229 IHTA 1984 provide an instalment option for IHT on certain assets: the executor can pay IHT in 10 equal annual instalments rather than in a single sum. Assets eligible for the instalment option: (1) Land and buildings (including residential property); (2) Shares or debentures in unlisted companies where the IHT represents at least 20% of the total IHT, or the shares give the shareholder control of the company; (3) Shares in any company where HMRC agrees that the tax cannot be paid without selling the shares; (4) Business assets (the whole or part of a business or interest in a business). The first instalment is due on the primary due date (6 months after the month of death). Subsequent instalments are due annually on the same date for 9 further years. For land and unlisted business assets: no interest accrues on the outstanding IHT (interest-free instalments). However, if the property or asset is sold before all instalments are paid, the outstanding IHT becomes immediately due and payable in full. Cash and investments are not eligible for the instalment option — IHT on these must be paid in full at the primary due date.
Interest on late IHT: the HMRC rate and how it accrues
If IHT is not paid by the primary due date (6 months after month of death), HMRC charges interest at the official rate (currently the Bank of England base rate plus 2.5%) from the primary due date until the date of payment. Interest also accrues on: (1) IHT on instalment assets where instalments are not paid on time; (2) Any additional IHT arising after a HMRC enquiry or valuation challenge (interest accruing from the primary due date, not from the date of the HMRC challenge). Interest on IHT is not tax-deductible — it is a penalty charge. However, interest on a loan taken out to pay IHT (e.g. an estate administration loan) is allowable against the estate for IHT purposes under the liability deduction rules. Executors should file and pay IHT as quickly as possible to minimise interest — even where a valuation is disputed with HMRC, an estimated payment 'on account' stops interest accruing on the estimated amount.
Executor's personal liability for IHT
The executor is personally liable for the IHT on the estate. If the executor distributes the estate to beneficiaries before paying HMRC all the IHT due, and the estate then has insufficient assets to pay the IHT, the executor may be personally liable to HMRC for the shortfall. This liability arises under s204 IHTA 1984: the personal representative is 'accountable' for the IHT chargeable on the estate. An executor who pays the full IHT to HMRC before distribution is protected — once IHT is paid, the executor is released from personal liability for that amount. An executor who knows there is IHT outstanding and distributes the estate regardless takes a serious personal financial risk. The executor should not distribute the estate (other than specific small payments for administrative purposes) until the IHT is fully paid and HMRC has issued a clearance certificate (form IHT30 — Clearance Certificate) confirming all IHT is settled.
IHT clearance certificate (IHT30): confirming IHT is fully paid
Once the executor is satisfied that all IHT has been paid (including any IHT on the instalment option, and any corrective accounts filed after the initial IHT400), the executor should apply to HMRC for a clearance certificate using form IHT30. The clearance certificate confirms that HMRC does not intend to raise any further IHT demands in relation to the estate. It does not cover future HMRC discoveries of undisclosed assets (executors have a duty to make full and accurate disclosure) — but for properly administered estates, the clearance certificate gives the executor and beneficiaries confidence that the IHT position is finalised. The clearance certificate can be obtained while instalment option payments are still ongoing — the certificate covers the IHT account as submitted, with the instalments continuing separately. Once all instalments are paid and no further IHT is outstanding, HMRC issues a final clearance.
Frequently Asked Questions
When do you have to pay inheritance tax?
IHT must be paid by the 'primary due date' — 6 months after the end of the month of death. For a death in March 2026, IHT is due by 30 September 2026. IHT on land, unlisted business shares, and business assets can be paid in 10 annual instalments — the first instalment is due at the primary due date. IHT on all other assets (cash, investments, quoted shares, insurance) must be paid in full at the primary due date. Interest runs at HMRC's official rate from the primary due date on any unpaid IHT.
How do I pay IHT before probate when the money is stuck in the estate?
Use HMRC's Direct Payment Scheme (DPS): most high street banks will transfer money directly from the deceased's account to HMRC without requiring a grant of probate, provided the executor completes the relevant DPS form. This is the standard solution where the estate has sufficient cash. If the estate lacks liquidity (most of the value is in property or investments), an IHT loan from a specialist lender is available — repaid from estate assets once probate is obtained. Alternatively, the instalment option for land and business assets means only the first instalment (one-tenth) needs to be paid before probate.
Can I pay inheritance tax in instalments?
Yes — for certain assets: land and buildings (including residential property), unlisted company shares (where they represent at least 20% of total IHT or the shareholder had control), and business assets can be paid in 10 equal annual instalments under s227 IHTA 1984. The first instalment is due at the primary due date. Subsequent instalments are due annually. No interest accrues on instalment assets as long as payments are made on time. If the asset is sold before all instalments are paid, the full outstanding IHT becomes due immediately.
What happens if IHT is not paid on time?
Interest accrues at HMRC's official rate (currently Bank of England base rate + 2.5%) from the primary due date on all unpaid IHT. There are no separate late-filing penalties for IHT (unlike income tax and CGT self-assessment) — but interest on late payment can be substantial on large estates. Executors should make interim payments 'on account' to HMRC where the valuation is disputed, to stop interest accruing on the estimated liability.
Is an executor personally liable for inheritance tax?
Yes — the executor (personal representative) is personally accountable for the IHT on the estate under s204 IHTA 1984. If the executor distributes the estate to beneficiaries before all IHT is paid, and the estate then cannot pay HMRC, the executor may be personally liable for the unpaid amount. Executors should always pay the full IHT before distribution and obtain an IHT clearance certificate (form IHT30) from HMRC before winding up the estate.
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