How to Pay Inheritance Tax UK: Deadline, Direct Payment Scheme, Instalments, and What to Do If You Can't Pay (2026)
IHT is due 6 months after the month of death (s226 IHTA 1984). The classic problem: probate is needed to access the estate's bank accounts, but HMRC requires IHT before issuing the IHT421 for probate. The Direct Payment Scheme (Form IHT423) breaks this deadlock — most UK banks will pay HMRC directly from the deceased's accounts without probate.
| Step | Action | Timing | Notes |
|---|---|---|---|
| 1 | Register the death | Immediately | Death certificate obtained; needed for all subsequent steps |
| 2 | Apply for IHT reference number | As soon as possible | HMRC online (or form IHT422). Allow 3+ weeks. Needed before any IHT payment. |
| 3 | Value the estate | Within weeks of death | Obtain professional valuations (property, business, shares); gather account balances, debts, and liabilities |
| 4 | Complete IHT400 + schedules | Before paying IHT | IHT400 is the main return; attach relevant schedules (IHT402, IHT403, IHT405, IHT417 etc.) |
| 5 | Pay IHT (or submit IHT423 for DPS) | By end of 6th month after month of death | Direct Payment Scheme: IHT423 submitted to each bank; instalment option: first instalment due 6 months from death |
| 6 | Submit IHT400 to HMRC | With or after IHT payment | HMRC processes the return and issues IHT421 to the probate registry |
| 7 | Apply for grant of probate/administration | After HMRC issues IHT421 | Probate application uses HMRC's IHT421 reference; once granted, estate assets can be accessed |
| 8 | Settle remaining estate liabilities | After probate | Pay debts, funeral costs, administration costs; pay instalments where applicable |
| 9 | Distribute the estate | After all liabilities settled | Only distribute AFTER all IHT paid (or instalment plan in place) — executors are personally liable for underpaid IHT |
2026/27. IHT deadline: s226 IHTA 1984 — 6 months after the month of death. Direct Payment Scheme: IHT423 submitted to bank/NS&I. Instalment option: ss227-229 IHTA 1984 for qualifying assets (UK land, business interests, qualifying shares). IHT reference number: obtained via HMRC online (allow 3+ weeks). IHT421: HMRC issues to probate registry after processing IHT400 — allow 12-16 weeks.
Paying IHT: Complete Guide
The IHT payment deadline — 6 months from end of death month
IHT must be paid by the end of the 6th month after the month of death (s226 IHTA 1984). The calculation uses calendar months, not a 6-month rolling period: if the death occurred on 15 January 2026, IHT is due by 31 July 2026. If death occurred on 30 November 2025, IHT is due by 31 May 2026. Late payment interest: HMRC charges interest at the Bank of England base rate plus 2.5% per year, currently 7.25% pa. Interest accrues automatically on any IHT paid after the 6-month deadline — even if the IHT400 has not yet been submitted. Penalties: HMRC may impose penalties for late or inaccurate returns (separate from interest). HMRC enquiry: once the IHT400 is submitted, HMRC can open a compliance check; HMRC can raise further IHT assessments within certain statutory time limits. Key point: the 6-month deadline applies to the initial IHT payment. The IHT400 return itself must also be submitted within 12 months of the end of the month of death (though best practice is to submit with or shortly after paying IHT).
The IHT-before-probate problem — and how the Direct Payment Scheme solves it
The classic IHT problem: HMRC requires IHT to be paid before it issues the IHT421 to the probate registry; the probate registry requires the IHT421 before granting probate; the banks require probate before releasing the deceased's funds. This creates a circular dependency: IHT is owed before the estate assets can be accessed. The Direct Payment Scheme (DPS) breaks this circle. Under the DPS: the executor completes HMRC Form IHT423 for each participating institution (most major UK banks, NS&I, and other financial institutions); the executor submits the IHT423 to the bank directly (not to HMRC); the bank transfers funds directly to HMRC's Inheritance Tax account (sort code 08-32-20, account 12001004, reference: the IHT reference number) without requiring probate; the bank marks those funds as transferred to HMRC and the executor does not have access to those funds. Not all banks participate, and some have minimum amounts. NS&I Premium Bonds and savings can also be transferred via the DPS. The DPS only applies to funds already held at death — it does not apply to assets that need to be sold to fund IHT (e.g. the family home where sale proceeds are needed).
The instalment option — pay IHT on property over 10 years
Where qualifying assets are included in the estate, the IHT attributable to those assets can be paid in 10 equal annual instalments (ss227-229 IHTA 1984). Qualifying assets for the instalment option: (1) UK land and buildings (including the main home — the most common use); (2) A controlling holding in a quoted company (>50% of the voting shares); (3) Unquoted shares where IHT exceeds £20,000 and the shares represent more than 10% of the total IHT value, or where HMRC is satisfied payment in one sum would cause undue hardship; (4) Business interests qualifying for BPR (but note: BPR itself may eliminate the IHT, making instalments less relevant). First instalment due: 6 months after the month of death (same date as the IHT deadline for the rest of the estate). Subsequent instalments: annually on the same date. Interest: interest is charged on any overdue instalments. Crucially, interest does NOT accrue on future unpaid instalments that are not yet overdue — but see below. Sale of the asset: if the qualifying asset is sold before all instalments are paid, all outstanding instalments become immediately due and payable. This is one of the most important rules: selling the family home means the remaining IHT instalments become due on completion. Interest run-off: for land and buildings, interest may accrue on the outstanding IHT balance even between annual instalments from April 2009 — check the current HMRC guidance.
What to do when there are no liquid assets to pay IHT
When the estate consists entirely of illiquid assets (e.g. a property that cannot be sold until after probate) and the deceased had no bank accounts with sufficient funds, the executor may face a genuine funding problem: IHT is due but the funds to pay it are locked behind probate. Options for executors in this situation: (1) Use the Direct Payment Scheme (DPS) for any bank accounts that do have funds — even if they do not cover the full IHT amount; (2) Apply the instalment option for IHT attributable to the property — the first instalment (10% of the property IHT) is still due at 6 months, but this reduces the upfront sum; (3) Personal loan to the estate: executors (or beneficiaries) may lend money to the estate personally to pay the IHT — this is a legitimate approach; the estate repays the loan after probate and sale; (4) Bridging loan or estate finance: specialist lenders offer bridging finance secured on the estate property to fund IHT before probate; these loans are typically repaid on the property sale. Personal representatives should be careful: executors are personally liable for IHT if they distribute the estate to beneficiaries before IHT is fully paid. HMRC can pursue executors personally for unpaid IHT — the estate's insolvency protection does not shield executors who have already distributed the estate.
How to obtain an IHT reference number and pay HMRC
Before paying any IHT, the estate must obtain an IHT reference number (the IHT payment reference). Without this, HMRC cannot allocate the payment correctly. How to obtain the IHT reference: apply online via HMRC's website (search 'IHT reference number') or complete form IHT422. Apply as early as possible — HMRC currently takes 3+ weeks to issue the reference. If applying online, the reference is usually issued faster. The reference number is in the format: A followed by digits (e.g. A123456). How to pay HMRC: (1) Online or telephone banking: bank transfer to HMRC Shipley (sort code 08-32-20, account 12001004); use the IHT reference as payment reference; (2) Barclays government banking service (cheque or cash): at a Barclays branch, payable to HM Revenue & Customs; (3) CHAPS or BACS transfer to HMRC; (4) Cheque by post: payable to HM Revenue & Customs; post to HMRC Inheritance Tax, HMRC Shipley, Bradford BD9 1UD. Once payment is received and the IHT400 processed, HMRC will issue the IHT421 to the probate registry — this is the form that unlocks the probate application. HMRC's current processing time for IHT421 issuance is approximately 12-16 weeks from submission of a complete IHT400 and payment.
Frequently Asked Questions
When must inheritance tax be paid in the UK?
IHT must be paid by the end of the 6th calendar month after the month of death (s226 IHTA 1984). Death in January 2026: IHT due by 31 July 2026. Death in November 2025: IHT due by 31 May 2026. Late payment interest: 7.25% pa from the due date. The IHT reference number must be obtained from HMRC before payment — allow 3+ weeks for HMRC to issue it. The IHT400 return should also be submitted to HMRC within 12 months of the end of the month of death, but in practice it is submitted with or shortly after the IHT payment.
How do I pay inheritance tax before probate is granted?
The Direct Payment Scheme (DPS — Form IHT423) allows most major UK banks and NS&I to transfer funds from the deceased's accounts directly to HMRC before probate, without releasing those funds to the executor. The executor completes IHT423 for each institution and submits it to the institution (not HMRC). The institution pays HMRC directly. This breaks the IHT-before-probate circular dependency. If the estate has no liquid funds (only illiquid assets like property), options include: (1) instalment option for property IHT (ss227-229 IHTA 1984); (2) personal loan from executors/beneficiaries to the estate; (3) specialist estate bridging finance secured on the property.
Can I pay inheritance tax in instalments?
Yes — for qualifying assets (ss227-229 IHTA 1984): UK land and buildings (including the main home), controlling interests in quoted companies (>50%), qualifying unquoted shares, and business interests. The IHT on those assets can be paid in 10 equal annual instalments. First instalment due: 6 months after the month of death (same deadline as all other IHT). If the asset is sold before all instalments are paid, all remaining instalments become immediately due. Interest applies to overdue instalments. The instalment option is requested when submitting the IHT400.
Are executors personally liable for inheritance tax?
Yes — personal representatives (executors under a will; administrators under intestacy) are personally liable for any IHT that remains unpaid if they distribute the estate to beneficiaries. HMRC can pursue executors personally for the amount of IHT that should have been paid before distribution. The executors' personal liability mirrors the amount distributed prematurely. This risk is why executors must either pay all IHT in full (or have a valid instalment plan in place) before making any distribution to beneficiaries. Beneficiaries may also become liable for IHT on assets they receive if the estate has insufficient assets to pay all IHT.
What is Form IHT423 and how does the Direct Payment Scheme work?
Form IHT423 is the form used to instruct a participating bank or NS&I to pay IHT directly to HMRC from the deceased's accounts. The executor: (1) Obtains the IHT reference number from HMRC first; (2) Completes IHT423 with the amount to be paid and the IHT reference; (3) Submits IHT423 to the financial institution (not to HMRC); (4) The institution transfers the specified amount to HMRC's account (sort code 08-32-20, account 12001004). The institution marks the funds as paid to HMRC — the executor cannot access them. Most major UK banks participate. NS&I Premium Bonds and savings accounts also participate. The DPS operates without probate being granted — solving the circular probate-IHT problem.
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