Who Pays Inheritance Tax in the UK (2026)? Executors, Beneficiaries & Donors

The personal representative — the executor named in the will, or the administrator appointed by the court — is primarily responsible for paying any inheritance tax due on the deceased's estate before obtaining the grant of probate or letters of administration. The IHT is paid from estate assets. The personal representative must file an IHT400 return with HMRC, calculate the tax due, pay at least a significant proportion before the grant is issued (HMRC will not release the grant until tax on non-instalment assets has been paid), and then distribute the net estate to beneficiaries. An executor who distributes the estate to beneficiaries before paying IHT is personally liable for the unpaid tax to the extent of the assets they distributed.

Usually not — in most estates, IHT is paid from the estate by the executor before distribution, so beneficiaries receive their inheritance net of any IHT already settled. However, there are scenarios where a beneficiary bears the IHT personally: (1) If a specific gift (a legacy of a named asset, such as a specific property or a sum of money) is expressed in the will to be 'subject to IHT' or 'free of IHT' is not stated and the will clause does not use grossing-up language, the IHT on that gift falls on the recipient. (2) If the estate has insufficient liquid assets to pay the IHT, the executor may need to claim contributions from beneficiaries who have received assets from the estate. (3) Where a beneficiary received a lifetime gift from the deceased within seven years before death (a potentially exempt transfer that has become chargeable), the donee is primarily liable for IHT on that gift.

A potentially exempt transfer (PET) is a lifetime gift from an individual to another individual (or to a bare trust). A PET is exempt from IHT if the donor survives seven years from the date of the gift. If the donor dies within seven years, the PET becomes chargeable and IHT may be due on it. The primary liability for IHT on a PET falls on the donee (the person who received the gift). Taper relief reduces the effective rate where the donor survived between three and seven years: 0–3 years: 40%; 3–4 years: 32%; 4–5 years: 24%; 5–6 years: 16%; 6–7 years: 8%. If the donee does not pay within 12 months of the date when the tax became due, the executor of the deceased donor's estate becomes secondarily liable. In practice, HMRC often looks to the executor first as the more identifiable party, with the executor then recovering from the donee.

When a will directs that a gift is made 'free of inheritance tax', the IHT on that gift is borne by the residuary estate rather than by the specific legatee. This means the residuary beneficiaries (typically children or other close family who receive what is left after all specific gifts are paid) effectively pay the IHT on the specific gifts that were made free of IHT. This can significantly reduce the residue if the estate contains many valuable specific gifts stated to be free of tax. Where a will is silent on who bears the IHT on a specific gift, the default position is that the gift is made subject to IHT and the recipient bears it — though this depends on the wording and the type of asset. Grossing-up calculations are required where cash legacies are made free of IHT in an estate paying IHT.

Assets that pass outside the will and probate (pension death benefits, jointly held property passing by survivorship, life insurance not in trust) may still form part of the taxable estate for IHT purposes, even though they are not administered by the executor. The primary liability for IHT on these assets depends on the asset type: (1) Pension death benefits: if brought within the estate (which will apply from April 2027 under proposed changes), IHT liability falls on the pension scheme trustees or the estate. (2) Jointly held property passing by survivorship: the IHT is borne by the estate of the deceased co-owner; the surviving owner acquires the asset but does not personally bear the IHT. (3) Life insurance in trust: if correctly written in trust, the policy proceeds are not in the estate and no IHT arises. If not in trust, the policy proceeds form part of the estate and IHT is borne by the estate.

Discretionary trusts are subject to their own IHT charging regime, separate from the death estate of the settlor. The key charges are: (1) the entry charge at the time assets are added to the trust above the nil-rate band; (2) the ten-year periodic charge of up to 6% of the trust's value above the available NRB, paid by the trustees every ten years; (3) exit charges when assets leave the trust, calculated proportionally. The trustees are responsible for filing the IHT100 return and paying these charges from trust assets. Beneficiaries who receive distributions from a discretionary trust do not pay IHT personally on those distributions — the trust itself has already borne the appropriate charge.

Yes — HMRC allows IHT on certain assets to be paid in ten equal annual instalments rather than as a lump sum. The instalment option applies to: qualifying land and buildings (including the family home), shares or securities in qualifying companies, and certain business and agricultural assets. Interest accrues on outstanding instalments if the asset is sold before all instalments are paid. For most other assets (cash, investments, personal property), IHT must be paid before the grant of probate is issued. Executors often arrange short-term bank borrowing ('estate loans') to fund the IHT payment on non-instalment assets before realising estate assets — the loan is repaid from estate proceeds once the grant is obtained and assets are sold.