Who Pays Inheritance Tax in the UK? The Executor, the Estate, and When It's Due (2026)
The estate pays inheritance tax — not the beneficiaries. The executor is responsible for calculating and paying IHT before probate is granted and before any assets are distributed. IHT is due 6 months after the month of death. A Direct Payment Scheme lets banks release funds before probate; an instalment option spreads the bill over 10 years for property and business assets.
| Asset / Situation | Who Pays IHT? | When? | Notes |
|---|---|---|---|
| Estate assets (cash, investments, property) | The estate (executor pays from estate funds) | Within 6 months of end of month of death | IHT must be paid before probate is granted |
| Property — instalment option elected | The estate (executor) | 10 equal annual instalments | Interest on outstanding balance (7.25%). Sale triggers immediate payment. |
| Failed PETs (gifts in 7yr before death) | The estate (primary); recipient (if estate can't pay) | 6-month deadline | Recipient of gift may be liable if estate is insufficient |
| Discretionary trust (periodic charge) | Trustees | Every 10 years (periodic charge) | Up to 6% of trust value. Exit charges on distributions. |
| Life insurance in trust | N/A — payout is outside the estate | Payout on death direct to trust | Used to fund estate IHT from outside; not itself IHT-taxable |
| IPDI trust property (life interest) | Trustees (on behalf of life tenant's estate) | On life tenant's death | Trust property treated as life tenant's estate |
| Jointly-tenanted property (first death) | N/A — no IHT on first death | IHT on second death only | Passes by survivorship; spousal exemption covers most cases |
| CLTs (gifts to trust in 7yr before death) | Estate (recalculated at death rate); trust may have credit for lifetime tax | 6-month deadline | 20% lifetime rate credit against 40% death rate |
Late payment interest rate 7.25% pa (Bank of England base + 2.5%, as at June 2026). Instalment interest also 7.25% pa. Professional probate and IHT advice recommended.
Who Pays IHT: Complete Guide
Who is legally responsible for paying inheritance tax?
The estate pays the IHT — not the beneficiaries personally. Within the estate, the executor (named in the will) or administrator (appointed by a court where there is no will, or where the executor cannot act) is personally responsible for: (1) calculating the IHT due (or engaging an accountant/solicitor to do so); (2) completing and submitting the IHT return (form IHT400 for estates above £325,000, or the IHT205/IHT207 for smaller estates — these forms are being replaced by online returns from 2024); (3) paying the IHT from the estate's funds before probate is granted; (4) distributing the remaining estate to beneficiaries after tax is paid. The executor's personal liability: if the executor distributes the estate to beneficiaries without first paying the IHT, HMRC can make the executor personally liable for the unpaid tax. This is a significant personal risk — executors should always ensure IHT is settled before any distribution. Where there are multiple executors: all are jointly and severally liable — each is equally responsible.
The 6-month deadline — when must IHT be paid?
Inheritance tax must be paid by the end of the 6th month following the month of death (s226 IHTA 1984). The deadline is always the last day of the 6th month: death in January 2026 → due 31 July 2026; death in June 2026 → due 31 December 2026; death in August 2026 → due 28 February 2027. Late payment: HMRC charges interest on unpaid IHT from the due date — the current rate is 7.25% per annum (set at Bank of England base rate + 2.5%). Interest compounds until the tax is fully paid. Penalties: where IHT is unpaid due to fraud or negligence, HMRC may also impose penalties in addition to interest. In practice, IHT should be paid as early as possible — the 6-month deadline is the latest, not the target. Many estates pay IHT when the IHT return is submitted (often before probate is granted — see below).
The probate chicken-and-egg — and the Direct Payment Scheme
There is a well-known problem with IHT and probate: (1) IHT must be paid before probate is granted — HMRC will not provide a clearance letter (needed for probate) until the tax is paid; (2) But without probate, the executor cannot access most of the estate's assets (bank accounts, investments, property cannot be sold or transferred without the grant of probate). How does the executor pay IHT without access to the estate's funds? Solutions: (a) Direct Payment Scheme: most major UK banks and building societies will release funds directly to HMRC to pay the IHT, before probate is granted — on production of the completed IHT400 form. The executor contacts each financial institution and requests a payment directly to HMRC. This is the most common route; (b) Personal funds: the executor pays from their own funds and reclaims from the estate once probate is granted; (c) Loan: some solicitors or specialist lenders offer short-term IHT loans (bridging finance) that are repaid from the estate once probate is granted; (d) National Savings: NS&I products (Premium Bonds, savings certificates) can be cashed in to pay IHT before probate is granted.
The instalment option — pay IHT in 10 annual instalments
Where an IHT bill would be difficult to pay in one lump sum (because the estate is primarily illiquid assets — property, a business), the instalment option (ss227-229 IHTA 1984) allows IHT to be paid in 10 equal annual instalments. Assets qualifying for the instalment option: (1) Land and buildings (including residential and commercial property — the main home, buy-to-let, farms, commercial land); (2) Shares or securities giving the deceased control of a company; (3) Unquoted shares (where HMRC accepts the lump-sum payment would cause undue hardship); (4) Business assets where BPR does not fully cover the IHT. How it works: the first instalment is due by the normal 6-month deadline; subsequent instalments are due on each anniversary; interest is charged on unpaid instalments at the standard HMRC interest rate (currently 7.25%); if the property is sold before all instalments are paid, the remaining balance becomes immediately due and payable. The instalment option avoids a forced sale of the family home or business to pay an IHT bill — but interest continues to accumulate on the outstanding balance.
Who pays IHT on gifts made in the 7 years before death?
Failed PETs (gifts to individuals that were within 7 years of the date of death) are added back to the estate for IHT purposes (s3A IHTA 1984). The primary liability for the IHT on the failed PET falls on the estate. However, if the estate does not have sufficient funds to pay the IHT attributable to the failed PETs (e.g., the estate assets have been largely distributed to specific beneficiaries, and the cash is insufficient), HMRC can require the recipient of the gift to pay the IHT attributable to their gift. In practice: this means that if a parent made large gifts to children in the years before death and the estate is otherwise small, the children may be personally liable for IHT on the gifts they received. This is an important consideration when structuring large PETs — the recipient should be aware of the potential liability if the donor dies within 7 years. For taper relief (years 3-7): the IHT on the failed PET is reduced by taper, but the liability still potentially falls on the recipient if the estate cannot pay.
Trusts: who pays IHT on trust property?
For assets held in trust, the responsibility for IHT depends on the type of trust: (1) Relevant property trusts (discretionary trusts): the trustees pay the periodic charge (s64 IHTA 1984 — every 10 years, up to 6% of the trust value) and exit charges (s65 — on distributions from the trust). The IHT does not fall on the beneficiaries or the settlor; it is a charge on the trust fund itself; (2) Immediate Post-Death Interest trusts (IPDIs — s49A IHTA 1984): the trust property is treated as part of the life tenant's estate. When the life interest ends (on death or otherwise), the life tenant's estate is treated as owning the trust property — and IHT is charged accordingly. The trustees pay the IHT from the trust fund, but it is attributable to the life tenant's estate; (3) Interest in Possession (pre-22 March 2006) trusts: property in a qualifying IIP trust is treated as owned by the life tenant for IHT; (4) Life insurance in trust: where a life insurance policy is written in trust, the trust payout goes directly to the trust beneficiaries — it is not part of the estate, and the beneficiaries receive the payout free of IHT. The payout is used to fund the IHT bill on the estate itself (from outside the estate).
Frequently Asked Questions
Who pays inheritance tax in the UK?
The estate pays inheritance tax — not the beneficiaries personally. The executor (if a will) or administrator (if no will) of the estate is legally responsible for calculating, submitting, and paying the IHT to HMRC. This happens before probate is granted and before assets are distributed to beneficiaries. If the executor distributes the estate before paying the IHT, they can be held personally liable for the unpaid tax.
When does inheritance tax have to be paid?
IHT must be paid within 6 months of the end of the month of death (s226 IHTA 1984). Example: death on 15 January 2026 — IHT due by 31 July 2026. Late payment: HMRC interest at 7.25% per annum (current rate). The instalment option (ss227-229 IHTA 1984) allows IHT on qualifying property and business assets to be paid in 10 annual instalments — the first by the 6-month deadline.
Do beneficiaries have to pay inheritance tax?
Not normally — the estate pays IHT before any distribution to beneficiaries. Exception: where the estate cannot pay the IHT attributable to a failed PET (a gift made in the 7 years before death), HMRC can pursue the recipient of the gift for the IHT on their gift. Beneficiaries who received large gifts from the deceased may therefore face a personal IHT liability if the deceased dies within 7 years of making the gift and the estate cannot fund the tax bill.
How is inheritance tax paid before probate?
The probate chicken-and-egg: IHT must be paid before probate, but probate is needed to access the estate's funds. The Direct Payment Scheme resolves this: major banks and building societies will release funds directly to HMRC before probate is granted, on production of the completed IHT400 return. NS&I products can also be cashed in before probate. Alternatively, the executor pays from personal funds and reclaims from the estate once probate is granted.
Can inheritance tax be paid in instalments?
Yes — the instalment option (ss227-229 IHTA 1984) allows IHT on qualifying assets to be paid in 10 equal annual instalments: qualifying assets include property (residential and commercial), business assets, and certain unquoted shares. The first instalment is due by the normal 6-month deadline. Interest is charged on outstanding instalments at 7.25% per annum. If the asset is sold before all instalments are paid, the outstanding balance becomes immediately due.
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