How to Pay Inheritance Tax UK: Deadlines, Direct Payment Scheme, Instalments, and IHT400 (2026)
IHT is due 6 months after the month of death — but you need probate to access the estate assets, and you need to pay IHT before probate. The Direct Payment Scheme, IHT bridge loans, and life insurance in trust are the tools that resolve this cash flow catch-22.
| Step | Action | Deadline | Notes |
|---|---|---|---|
| Death | Register the death; appoint executors (or administrators if no will — 'letters of administration') | Death registration: within 5 days (England) | Executor named in the will; administrator appointed by the court if no will |
| Estate valuation | Value all assets at date of death (open market value); obtain RICS valuation for property; obtain probate values for shares (¼-up rule); list all liabilities | As soon as practical after death; before IHT400 submission | Professional valuations needed for property, business interests, and complex assets; shares: ¼-up rule for listed shares at date of death |
| Apply Direct Payment Scheme (DPS) if needed | If the estate lacks liquid assets: complete HMRC form PA7; send to each bank/building society with the deceased's accounts; banks transfer funds directly to HMRC to pay IHT | Before the 6-month IHT deadline; HMRC acknowledges receipt | Form PA7: available from HMRC website; each bank has its own process; Premium Bonds and National Savings can also be encashed pre-probate |
| Complete and submit IHT400 | Complete the main IHT return (IHT400) and all applicable supplementary schedules (IHT402-IHT419); pay the IHT due (or elect for instalments on qualifying assets) | IHT400 must be submitted and IHT paid (or instalment election made) before applying for probate | HMRC processes the IHT400 and issues a receipt; form IHT421 sent to the probate registry to confirm IHT position |
| IHT payment deadline | Pay IHT in full (except qualifying assets where instalments elected) | 6 months after the end of the month of death (s226 IHTA 1984): death in January 2026 → IHT due 31 July 2026. Death in October 2026 → IHT due 30 April 2027 | HMRC interest: currently 7.25%/yr charged on any IHT not paid by the due date; check HMRC's current rate |
| Apply for probate (or letters of administration) | Submit probate application to HMCTS; attach IHT421 from HMRC (confirming IHT position) | After IHT400 submitted and IHT paid/accounted for | Grant of probate: usually 4-8 weeks after application; letters of administration: usually slightly longer; the grant enables the executor to access estate assets |
| Instalment payments (qualifying assets) | If the instalment option (s227 IHTA 1984) was elected for qualifying assets (land, home, business): 10 annual instalments; first instalment due at the 6-month deadline; subsequent instalments annually | First instalment: 6 months after month of death; then annually for 10 years | Interest on outstanding instalments from 6-month deadline; if qualifying asset is sold, ALL outstanding IHT becomes due immediately; only qualifying assets can use instalments |
IHT payment deadline: s226 IHTA 1984 — 6 months after end of month of death. HMRC interest: late payment rate (currently 7.25%/yr; rate linked to Bank of England base rate; check HMRC website for current rate). Direct Payment Scheme: HMRC form PA7; bank transfers to HMRC pre-probate; NS&I/Premium Bonds also available. Instalment option: s227 IHTA 1984 — qualifying assets: land/buildings (including family home), controlling shareholdings (>50%), qualifying unquoted shares, business interests; 10 annual instalments; interest charged from 6-month deadline; sale of qualifying asset → ALL outstanding IHT immediately due. IHT400: main IHT return; supplementary schedules IHT402-IHT419; IHT421 issued post-processing → to probate registry. IHT421: sent by HMRC to confirm IHT settled; required for probate application (PA1P testate; PA1A intestate). Excepted estates: simplified declaration (IHT205/IHT217) where estate below £1m and IHT = £0; no IHT400 required. Penalties: HMRC penalty regime for late filing and understated estates. Listed shares value: ¼-up rule = lower price + ¼ of (higher price - lower price) at date of death. Property value: open market value at date of death (RICS valuation).
How to Pay Inheritance Tax: Complete Guide
The IHT cash flow problem — and how to solve it
The IHT catch-22 is one of the most practically challenging aspects of estate administration: IHT must be paid (or accounted for) BEFORE the executor can obtain a grant of probate. But without probate, the executor cannot access most of the estate's assets (bank accounts are frozen; property cannot be sold; share accounts require a grant). The result: the executor must find funds from somewhere to pay the IHT before probate — while being unable to access the estate. The Direct Payment Scheme (DPS) is the primary solution: HMRC operates an agreement with banks and building societies where the deceased's accounts can be used to pay IHT directly, before probate. The executor completes HMRC form PA7 (available on HMRC's website) and sends it to each relevant bank or building society. The bank reviews the request and, if approved, transfers the specified funds directly to HMRC's bank account. National Savings & Investments (NS&I) Premium Bonds, savings certificates, and ISAs can also be encashed without probate to pay IHT. Life insurance policies written in trust: these pay outside the estate and do not require probate — the trustees of the life insurance trust can pay the insurer's proceeds directly to fund the IHT bill. This is one of the strongest arguments for writing life insurance in trust. IHT bridge loans: most major UK banks (Barclays, HSBC, Lloyds, Natwest, and specialist estate finance providers) offer short-term loans to executors for IHT payment. The loan is secured against the estate and repaid from the estate assets once probate is granted.
The IHT deadline — 6 months after the month of death
Under s226 IHTA 1984, IHT is due for payment 6 months after the end of the month in which the death occurred. Examples: death on 10 January 2026 → IHT due 31 July 2026 (end of the 7th month = end of January + 6 months = end of July); death on 15 October 2026 → IHT due 30 April 2027. The 6-month deadline applies to the main estate IHT. For assets on which the instalment option has been elected, the first instalment is due at the 6-month deadline and subsequent instalments annually. HMRC interest: if IHT is not paid by the 6-month deadline, interest accrues from that date at HMRC's late payment interest rate (currently 7.25% per annum — this rate is linked to the Bank of England base rate and changes periodically). For a large IHT bill, a 3-month delay can mean thousands of pounds in interest. The interest is deductible from the estate as a liability — small consolation. Paying early: IHT can be paid before the 6-month deadline. HMRC issues a reference number (HMRC Inheritance Tax account number) before the IHT400 is submitted; payment can be made by bank transfer, cheque, or at a bank branch. For complex estates where the IHT400 takes time to prepare, paying an amount 'on account' before the 6-month deadline (and claiming a credit later) avoids interest from the 6-month date.
The instalment option — spreading IHT on property and business assets
Section 227 IHTA 1984 allows IHT on certain qualifying assets to be paid by 10 equal annual instalments (rather than as a lump sum at 6 months). Qualifying assets for the instalment option: (1) land and buildings (including the family home and investment property); (2) shares giving a controlling interest (over 50%) in a company; (3) unquoted shares where: (a) the executors cannot pay without undue hardship without selling the shares; or (b) the shares represent over 10% of the nominal value of all shares; or (c) the company is mainly a land-owning company; (4) business interests (partnerships). The instalment option must be elected on the IHT400 form (Boxes 59-66 of the IHT400). The first instalment is due at the 6-month deadline; subsequent instalments are due annually for 10 years. Interest is charged on outstanding instalments from the 6-month deadline at HMRC's late payment rate (same as the standard late payment rate — currently 7.25% per annum). Important: if the qualifying asset is sold during the instalment period, ALL remaining IHT becomes due IMMEDIATELY on the date of sale — the instalment facility is lost. This is particularly relevant for property: if executors intend to sell the property, the full IHT must be paid. The instalment option is primarily designed for situations where the asset cannot easily be liquidated (e.g., a family farm, a controlling shareholding in a private company, or a property that cannot be sold quickly).
The IHT400 form — what executors must submit
The IHT400 is the main inheritance tax return. It is submitted to HMRC before the executor applies for probate. The IHT400 includes: the deceased's personal details; a complete list of all assets (property, savings, investments, business interests, pensions from April 2027); all liabilities (mortgages, debts); all exemptions claimed (spousal exemption, charitable exemption, BPR, APR); all gifts made in the 7 years before death (IHT403 — gifts schedule); all jointly owned property (IHT404); and the IHT calculation. Supplementary schedules: IHT402 (transferred NRB); IHT403 (gifts and gifts exemptions); IHT404 (jointly owned assets); IHT405 (houses, land, and buildings); IHT407 (household goods); IHT408 (nominated assets — pension death benefits); IHT409 (pension policies); IHT410 (life assurance); IHT411 (listed stocks and shares); IHT412 (unlisted shares); IHT413 (business interests); IHT414 (agricultural interests); IHT415 (interest in another estate); IHT417 (foreign assets); IHT418 (assets held in trust); IHT419 (debts); IHT436 (transferred RNRB). After submitting the IHT400 and paying the IHT: HMRC issues a receipt and the IHT421. The IHT421 confirms the IHT has been settled and is sent to the probate registry. The executor then applies for the grant of probate (PA1P for testate estates with a will; PA1A for intestate estates without a will) and attaches the IHT421. The grant of probate is usually issued 4-8 weeks after the probate application. Simple estates (below the IHT threshold): where the estate is clearly below the NRB + RNRB, and no IHT is due, the simplified IHT205 (or IHT217 for excepted estate transfers) may be used instead of the full IHT400 — avoiding most of the complex supplementary schedules.
Excepted estates — when an IHT400 is not required
Not every estate requires a full IHT400. An 'excepted estate' is an estate where HMRC accepts a simplified declaration without a full return. Excepted estates include: (1) low-value estates: the total estate is below £1 million AND IHT due is zero (the estate is below the threshold including any transferred NRB and RNRB); (2) exempt estates: the estate passes entirely to the spouse/civil partner or charity (no IHT due regardless of value); (3) foreign domicile estates: the deceased was never domiciled in the UK; the UK estate is less than £150,000; and there are no other UK assets above that threshold. For excepted estates, the executor submits a simplified IHT205 (or an updated IHT205 form as revised) as part of the probate application — no separate IHT400 required; no IHT payment required. Most straightforward estates (spouse to spouse; estates clearly below the threshold with no lifetime gifts to declare) are excepted estates. However: if there are complex gifts in the 7yr history, foreign assets, business interests, trusts, or other complications, the estate is unlikely to qualify as excepted and the full IHT400 is needed. Penalty regime: HMRC can investigate and impose penalties where an estate is declared as excepted when it should have required a full IHT400 — a common risk where large gifts in the 7yr history are overlooked.
Frequently Asked Questions
When does inheritance tax have to be paid?
IHT is due 6 months after the end of the month in which the deceased died (s226 IHTA 1984). Example: death in January 2026 → IHT due by 31 July 2026; death in October 2026 → IHT due by 30 April 2027. Estates where the IHT on property or business assets is paid by the instalment option (s227 IHTA 1984): the first instalment is due at the 6-month deadline; subsequent annual instalments for up to 10 years. Interest at HMRC's late payment rate (currently 7.25%/yr) is charged on IHT not paid by the 6-month deadline. IHT must be paid before a grant of probate can be obtained — which creates a cash flow challenge for executors (most estate assets are frozen pending probate).
How can I pay IHT before probate if the estate assets are frozen?
Several options: (1) Direct Payment Scheme (DPS): complete HMRC form PA7 and send to each bank or building society holding the deceased's accounts; the bank transfers funds directly to HMRC before probate — the most common and straightforward solution; (2) National Savings and Premium Bonds: can be encashed before probate to fund IHT; (3) Life insurance in trust: policies written in trust pay immediately outside the estate (no probate needed) — ideal for pre-funding IHT; (4) IHT bridge loan: estate finance specialists and major banks offer short-term IHT loans to executors, secured against the estate and repaid once probate is granted. For large estates with property, where the IHT cannot be fully covered by the DPS, a bridge loan is often necessary while the property is sold post-probate.
Can inheritance tax be paid in instalments?
Yes — for certain qualifying assets, IHT can be paid in 10 equal annual instalments under s227 IHTA 1984. Qualifying assets: land and buildings (including the family home and investment property); shares giving a controlling interest (over 50%); certain unquoted shares; business and partnership interests. The election must be made on the IHT400 form. The first instalment is due at the 6-month deadline; subsequent instalments annually for up to 10 years. Interest is charged on outstanding instalment amounts from the 6-month due date at HMRC's late payment rate (currently 7.25%/yr). Critical: if the qualifying asset is sold during the instalment period, ALL remaining IHT becomes due immediately — the instalment facility is automatically lost on sale.
What is the Direct Payment Scheme for inheritance tax?
The Direct Payment Scheme (DPS) allows IHT to be paid directly from the deceased's bank and building society accounts before probate is granted. The executor completes HMRC form PA7 (available from HMRC) and sends it to each bank or building society. The bank reviews the request and, if approved, transfers the specified funds directly to HMRC to settle the IHT — without the executor needing a grant of probate to access the accounts. National Savings & Investments (NS&I) Premium Bonds and savings certificates can also be encashed under the same pre-probate mechanism. The DPS is the primary solution to the IHT cash flow problem (IHT due before probate; probate needed to access assets). Most major UK banks participate in the DPS, but each has its own process and timeline.
What is the IHT400 form and when must it be submitted?
The IHT400 is the main HMRC inheritance tax return. It must be submitted (and IHT paid) before the executor applies for a grant of probate. The IHT400 covers: all assets and liabilities; all exemptions (spousal, charitable, BPR, APR); all gifts in the 7 years before death; and the IHT calculation. Supplementary schedules cover specific areas (IHT402 for transferred NRB; IHT403 for gifts; IHT405 for property; IHT411 for shares; IHT436 for transferred RNRB, etc.). HMRC issues a receipt and the IHT421 after processing — the IHT421 is attached to the probate application. Excepted estates (low value; estate below threshold; no complex assets): a simplified form may be used instead of the full IHT400. HMRC can impose penalties for understated or misclassified excepted estates.
Life Insurance in Trust Solves the IHT Cash Flow Problem
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