Inheritance Tax on Death UK: What Happens, When It Is Due, and How the Estate Pays It (2026)
IHT is due 6 months after the end of the month of death — and must be paid before probate is granted, even though most estate assets are frozen until probate. The Direct Payment Scheme solves this: banks release funds directly to HMRC without probate. Property IHT can be paid in 10 annual instalments. If assets fall in value after death, IHT refunds are available.
| IHT on Death — Key Stage | When | Action / Form |
|---|---|---|
| Obtain HMRC IHT reference number | As soon as possible after death | Online via HMRC — needed for Direct Payment Scheme |
| Direct Payment Scheme — banks pay HMRC | Before probate (with IHT reference) | Contact each bank; they transfer direct to HMRC. IHT paid without probate. |
| Submit IHT400 + supplements to HMRC | Before applying for probate | IHT400 + schedules. Excepted estates: online written confirmation |
| IHT payment due | 6 months from end of death month (s226 IHTA) | Pay non-instalment IHT in full. Instalment: 1st instalment due. |
| Interest on late IHT | From due date if unpaid | 7.25% pa daily. Apply Direct Payment Scheme to avoid interest. |
| Apply for probate | After IHT paid / Direct Payment Scheme completed | PA1P (with will) or PA1A (no will) to Probate Registry |
| Loss on sale — listed investments (s179 IHTA) | Within 12 months of death | Claim refund if sold below probate value. Net all qualifying sales. |
| Loss on sale — property (s191 IHTA) | Within 4 years of death | Claim refund if sold below probate value. Claim within 7yr. |
| IHT clearance certificate | After all IHT paid | IHT421 form → HMRC issues clearance letter. Needed before final distribution. |
2026/27. IHT late payment interest: 7.25% pa (HMRC base rate + 2.5%). Instalment option (ss227-229 IHTA): 10 annual instalments for land/property/business/controlling shareholdings. First instalment at 6-month deadline; balance over 10yr. Accelerates on sale.
IHT on Death: Complete Guide
How IHT is assessed on death — the estate calculation
On death, the personal representatives (executor named in the will, or administrator if there is no will) must calculate the total value of the estate. The IHT estate is: (1) All assets owned at death at their open market value (OMV) on the date of death: property (residential, commercial, agricultural), bank accounts, savings, investments, personal possessions, business interests, pension funds (from 6 April 2027 — currently outside the estate), and the deceased's share of jointly-owned assets; (2) Plus gifts with reservation (s102 FA1986) — assets given away during life but where the donor retained a benefit (e.g., gave away the home but continued living there rent-free); (3) Minus funeral expenses (s172 IHTA 1984): reasonable funeral costs, headstone, wake — typically up to £5,000–£10,000 accepted; (4) Minus other debts and liabilities: mortgages, outstanding loans, credit card debts, utility bills, income tax owed at death — all deducted from the estate. Net estate = gross assets − liabilities − funeral costs. Then: apply the NRB (£325,000), RNRB (£175,000 if applicable), and any transferred thresholds from a predeceased spouse (s8A/s8G IHTA). IHT = taxable estate × 40% (or 36% if 10%+ to charity under s36 IHTA 1984).
The IHT deadline — when must inheritance tax be paid?
Inheritance tax is due by the end of the sixth month following the month of death (s226 IHTA 1984). This is an absolute deadline — interest accrues from the due date, not from any later payment date. Examples: death on 3 January 2026 → IHT due 31 July 2026; death on 20 June 2026 → IHT due 31 December 2026; death on 31 October 2026 → IHT due 30 April 2027. Interest on late payment: HMRC charges interest on overdue IHT at the rate of 7.25% per annum (2026 rate — linked to HMRC base rate plus 2.5%). Interest accrues daily. Instalment option assets (property, business): where IHT is paid by instalments, the unpaid instalments also accrue interest. The instalment option is on the property/business portion only — the non-instalment portion is still due by the 6-month deadline. The 12-month instalment deadline rule: if the estate cannot pay all the IHT by the 6-month deadline, the account (IHT400) can still be submitted and the tax paid in instalments where the option applies — but account submission should not be delayed, as penalties for late submission are separate from late payment interest.
The IHT-before-probate problem and how to solve it
The classic catch-22: IHT must be paid before probate is granted, but the estate's assets are frozen until probate is granted. The main solutions: (1) Direct Payment Scheme (DPS): banks, building societies, and NS&I can pay IHT directly to HMRC from the deceased's accounts without waiting for probate. The personal representative contacts each financial institution holding funds, provides an IHT reference number (obtained from HMRC before submitting the IHT400), and requests a direct payment to HMRC. The bank releases the funds directly to HMRC. The personal representative then obtains probate with the IHT having been paid; (2) Life insurance in trust: a whole-of-life policy written in trust pays out to the trust beneficiaries (not the estate) without probate — the trustees can use the funds to loan money to the estate to pay IHT, or pay the estate's IHT directly under specific arrangements; (3) Instalment option for property: where the main asset is property, the instalment option (ss227-229 IHTA) allows the first instalment to be paid before probate and the property sold or estate administered in stages; (4) Executor loans: many banks will advance funds to the executor personally (not the estate) to pay IHT pending probate — this is a personal loan to the executor, not an estate loan; (5) National Savings: NS&I Premium Bonds and other products can be cashed in to pay IHT before probate under HMRC's DPS arrangement.
The IHT return — form IHT400 and IHT205
IHT400 (the full account): required where the estate is not an 'excepted estate'. The IHT400 is the main inheritance tax return and must be submitted to HMRC before probate can be applied for. Supplementary schedules (IHT40X series) cover: IHT401 (domicile), IHT402 (transferred NRB), IHT403 (gifts), IHT404 (jointly-owned assets), IHT405 (houses/land/buildings), IHT406 (bank/building society accounts), IHT407 (household and personal goods), IHT408 (household goods set off against debts), IHT409 (pensions), IHT410 (life assurance/annuities), IHT411 (listed stocks/shares), IHT412 (unlisted stocks/shares), IHT413 (business and partnership interests), IHT414 (agricultural relief), IHT415 (interest in another estate), IHT416 (debts owed to estate), IHT417 (foreign assets), IHT418 (assets held in trust), IHT419 (debts owed by deceased), IHT420 (heritage assets), IHT421 (probate summary — sent to the Probate Registry), IHT430 (instalment option), IHT435 (RNRB), IHT436 (transferred RNRB). Excepted estates (simplified return using HMRC's online service): estates that meet the excepted estate conditions (low value, or surviving spouse/civil partner, or qualifying spouse transfer) can use a simpler process — the full IHT400 is not required. From 1 January 2022: most non-taxable excepted estates no longer need to submit an IHT205 form — probate can be applied for online with a written confirmation from the personal representative.
Loss reliefs after death — reclaiming IHT when values fall
Where estate assets fall in value between the date of death (when probate value is set) and the date of sale, the estate may claim a refund of IHT: (1) Loss on sale of listed investments (s179 IHTA 1984): if listed shares, unit trusts, or other qualifying investments are sold by the personal representatives within 12 months of death at below the probate value, the estate can substitute the sale price for the probate value and claim a refund of the IHT on the difference. Important: the claim is on the net position — gains on other listed investments sold in the same 12-month period offset the losses. The claim must be made within 4 years of the end of the 12-month qualifying period. Sales by beneficiaries after distribution do not qualify — the shares must be sold by the personal representatives; (2) Loss on sale of land and property (s191 IHTA 1984): if the estate sells land or property within 4 years of death at below the probate value, the estate can substitute the sale price and claim an IHT refund. The 4-year window is longer than for shares (12 months) because property takes longer to sell. The claim must be made within 7 years of death. Adjustments: where the property was in a poor condition at the date of death and restored before sale, the improvement costs are deducted from the relief. These reliefs can provide significant IHT refunds in falling markets — always consider them when selling estate assets below probate value.
Frequently Asked Questions
When must inheritance tax be paid after someone dies?
IHT is due by the end of the sixth month following the month of death (s226 IHTA 1984). Example: death on 15 March 2026 → IHT due 30 September 2026. Interest accrues at 7.25% per annum on overdue IHT from the due date. Instalment option: where IHT is paid in annual instalments (property, business shares), the first instalment is due at the 6-month deadline and subsequent instalments on each anniversary. The estate's non-instalment IHT is always due by the 6-month deadline.
How does the estate pay inheritance tax before probate?
The estate cannot access most assets before probate — but IHT must be paid before probate is granted. Solutions: (1) Direct Payment Scheme — banks, building societies, and NS&I release funds directly to HMRC from the deceased's accounts without requiring probate. The personal representative contacts each institution with an HMRC IHT reference number and requests a direct payment to HMRC; (2) Life insurance in trust — pays to the trustees outside the estate and can fund the IHT bill without probate; (3) NS&I Premium Bonds — can be cashed in to pay IHT under the DPS before probate; (4) Instalment option — first instalment for property can be paid before probate, with the balance over 10 years.
What is the IHT400 form?
The IHT400 is the main Inheritance Tax Account submitted to HMRC when someone dies leaving a taxable estate (or an estate that does not meet the excepted estate conditions). It lists all assets and liabilities, calculates the IHT due, and applies the appropriate reliefs (NRB, RNRB, BPR, APR, etc.). Supplementary schedules (IHT401–IHT436) cover specific asset types. The IHT400 must be submitted before probate can be applied for. From 1 January 2022: many non-taxable estates no longer need to submit IHT205 — the personal representative confirms the estate details in writing and applies for probate online.
Can I claim an IHT refund if the estate assets fall in value?
Yes — two main post-death loss reliefs apply: (1) Listed investments (s179 IHTA 1984): if the personal representatives sell listed shares within 12 months of death below the probate value, they can substitute the sale price and claim an IHT refund on the shortfall. Net position across all qualifying investment sales in the period applies. Claim within 4 years of the 12-month period end; (2) Land/property (s191 IHTA 1984): if the estate sells land or property within 4 years of death below the probate value, the sale price is substituted and an IHT refund claimed. Claim within 7 years of death.
What is the instalment option for inheritance tax?
The instalment option (ss227-229 IHTA 1984) allows IHT attributable to certain assets to be paid in 10 equal annual instalments rather than in full at the 6-month deadline. Qualifying assets: land and property (including the family home, buy-to-let, and agricultural land), business interests, controlling shareholdings in companies (where the instalment is practical), and woodlands. The first instalment is due at the normal 6-month deadline; subsequent instalments fall due on each anniversary. Interest accrues on unpaid instalments. The instalment option is automatically accelerated if the property is sold before all instalments have been paid — the full remaining balance becomes due on sale.
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