How to Pay Inheritance Tax: Deadlines, Methods and Options
Inheritance tax must be paid before probate is granted — but you usually cannot access the deceased's money without probate. Here is exactly how to navigate this catch-22, what the payment methods are, when you can pay in instalments, and how to claim back any overpayment.
Note: This article covers the IHT payment process in England and Wales. Scotland and Northern Ireland have different probate procedures but the IHT payment rules are the same across the UK.
IHT Payment — Key Deadlines
When Is IHT Due?
Inheritance tax is due by the end of the sixth month after the month in which the person died. This is not six months from the date of death — it is the end of the sixth calendar month.
| Date of death | IHT due by |
|---|---|
| 1 January | 31 July |
| 15 March | 30 September |
| 28 June | 31 December |
| 3 November | 31 May (following year) |
Examples of IHT payment deadlines
Interest accrues from the due date on any unpaid amount. There are no HMRC penalties specifically for late payment of IHT, but the interest charges can be substantial on large bills. See our complete IHT guide for a full overview of how inheritance tax works.
The Catch-22: Pay Before Accessing the Estate
Here is the fundamental problem executors face: HMRC requires at least some IHT to be paid before it will issue the IHT421 certificate, which is needed to apply for probate. But without probate, executors cannot access the deceased's bank accounts, investments, or sell property.
There are several ways to resolve this:
- Direct Payment Scheme — the most common solution (see below)
- Executors pay from their own funds — and reclaim from the estate after probate
- Bank borrowing — some banks offer executor loans secured against the estate
- Instalment option — for property and certain other assets, only the first instalment needs to be paid before probate
- National Savings products — NS&I will release funds directly to HMRC on the executor's request
How to Actually Pay
Before making a payment, you need an IHT reference number from HMRC. Apply using form IHT422 (available on GOV.UK) at least 15 working days before you intend to pay.
Payment methods include:
- Bank transfer (CHAPS or Faster Payments): Pay to HMRC's bank account using the IHT reference number. This is the fastest method.
- Direct Payment Scheme: Ask the deceased's bank to transfer funds directly to HMRC (see below)
- Cheque: Send to HMRC with the payslip from the IHT400 or IHT421. Allow extra time for postal delivery and cheque clearing.
- At your bank: Pay at a branch using the HMRC payslip
Always use the correct IHT reference number when making payments. HMRC processes thousands of IHT payments and an incorrect reference can cause delays and misallocated payments.
The Direct Payment Scheme
The Direct Payment Scheme is the most commonly used method for paying IHT before probate. Here is how it works:
- The executor identifies which of the deceased's bank accounts hold sufficient funds
- The executor writes to each bank or building society, requesting that they transfer a specific amount directly to HMRC for IHT
- The letter must include the HMRC payslip (from the IHT400) and specify the amount to be transferred
- The bank transfers the money directly to HMRC — the executor does not need probate for this
- HMRC issues the IHT421 receipt, which the executor uses to apply for probate
Most major UK banks participate in the Direct Payment Scheme. Some building societies and smaller banks may not, so check in advance.
Anne is the executor of her mother's estate. The IHT bill is £120,000. Her mother had £80,000 in a Barclays savings account and £60,000 in a Nationwide ISA.
| Step | Action |
|---|---|
| 1 | Anne completes IHT400 and gets HMRC payslip |
| 2 | Writes to Barclays requesting £80,000 transfer to HMRC |
| 3 | Writes to Nationwide requesting £40,000 transfer to HMRC |
| 4 | Both institutions transfer funds directly to HMRC |
| 5 | HMRC issues IHT421 — Anne applies for probate |
| 6 | Probate granted — Anne accesses remaining estate assets |
The Instalment Option
For certain types of asset, you can spread the IHT payment over 10 equal annual instalments. This is particularly useful for property, where selling quickly to pay the tax may not be practical or desirable.
Qualifying assets include:
- Land and buildings (including the family home)
- A business or interest in a business
- Certain unquoted shares (including AIM shares)
- Quoted shares that gave the deceased control of the company
- Timber
| Feature | Detail |
|---|---|
| Number of instalments | 10 equal annual payments |
| First instalment due | 6 months after death (same as normal deadline) |
| Interest charged? | Yes, on outstanding balance (but interest-free for some BPR/APR assets) |
| What if asset is sold? | Remaining instalments become due immediately |
| Can you pay early? | Yes, you can pay off the balance at any time |
Key features of the IHT instalment option
The estate includes a family home worth £600,000. The IHT attributable to the property is £180,000. The executors elect to pay in instalments.
| Instalment | Amount | Running total paid |
|---|---|---|
| Year 1 (due 6 months after death) | £18,000 | £18,000 |
| Year 2 | £18,000 | £36,000 |
| Year 3 | £18,000 | £54,000 |
| ... | ... | ... |
| Year 10 | £18,000 | £180,000 |
Interest on the outstanding balance is charged in addition
If the family sells the property in year 4, the remaining £108,000 becomes due immediately.
Late Payment Interest
HMRC charges interest on any IHT paid after the due date. The interest rate is set by HMRC and changes periodically — check the GOV.UK website for the current rate.
Interest is charged from the due date, not from the date HMRC chases payment. On a large IHT bill, even a few months' delay can add thousands of pounds in interest.
Assuming an interest rate of 7.5% per annum (check current rate):
| IHT bill | 3 months late | 6 months late | 12 months late |
|---|---|---|---|
| £100,000 | £1,875 | £3,750 | £7,500 |
| £250,000 | £4,688 | £9,375 | £18,750 |
| £500,000 | £9,375 | £18,750 | £37,500 |
Illustrative only — actual rates vary
Claiming Back Overpaid IHT
If estate assets are sold for less than the probate value, you may be entitled to a refund of the overpaid IHT:
- Property (IHT35): If land or buildings are sold within 4 years of death for less than the probate value, the executors can substitute the sale price and reclaim the difference in IHT
- Quoted shares and investments (IHT38): If sold within 12 months of death for less than the probate value, the executors can claim a refund based on the lower value
Important: The relief applies to all qualifying assets sold in the period, not just those that fell in value. If some assets rose in value and others fell, you must include all sales in the calculation. If the total sale proceeds exceed total probate values, no claim can be made.
Frequently Asked Questions
When is inheritance tax due after someone dies?
IHT is due by the end of the sixth month after the month of death. For example, if someone dies on 15 March, IHT is due by 30 September. Interest starts accruing from the due date even if probate has not been granted yet.
How do you pay inheritance tax before probate?
This is the classic 'catch-22' — you need to pay IHT before you can get probate, but you need probate to access the estate's money. The main solutions are: the Direct Payment Scheme (banks release funds directly to HMRC), personal funds from executors, borrowing, or the instalment option for property and certain other assets.
Can inheritance tax be paid in instalments?
Yes, for qualifying assets including land and property, a business or interest in a business, certain shares, and timber. IHT on these assets can be paid in 10 equal annual instalments. Interest is charged on the outstanding amount. If the asset is sold, the remaining balance becomes due immediately.
What is the Direct Payment Scheme for inheritance tax?
The Direct Payment Scheme allows executors to arrange for banks and building societies holding the deceased's money to pay some or all of the IHT directly to HMRC. The executor writes to the bank with HMRC's payslip, and the bank transfers the funds without the need for probate.
What happens if you pay inheritance tax late?
HMRC charges interest on late payments from the due date. The interest rate changes periodically — check HMRC's website for the current rate. There are no penalties for late payment of IHT itself (unlike income tax), but the interest compounds and can add up quickly on large bills.
Can you claim back overpaid inheritance tax?
Yes. If assets are sold within certain time limits for less than the probate value, you can claim a refund using form IHT35 (for property sold within 4 years of death) or form IHT38 (for quoted shares and investments sold within 12 months). The executors must make the claim.
Find Out How Much IHT Your Estate Faces
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