When Do You Pay Inheritance Tax?
Understanding payment deadlines, interest charges, and installment options
Important Deadline
Inheritance tax must be paid within 6 months of the end of the month in which the person died. Interest is charged on late payments from this date.
Payment Timeline
Inheritance tax is due 6 months after the end of the month in which the person died.
Examples:
- Death in January → Tax due by 31st July
- Death in March → Tax due by 30th September
- Death in December → Tax due by 30th June (following year)
Interest starts from the day after the due date if any amount remains unpaid.
If you don't yet know the final liability, you can make payments on account to reduce or avoid interest. When the final IHT is agreed, HMRC will credit these payments against the balance due.
HMRC charges daily simple (non-compounding) interest on overdue amounts. Rates change from time to time, so check the latest HMRC interest rate before paying.
Current rate: Interest rates vary - check HMRC's website for current rates.
How to pay
- Approve through your bank (Open Banking) or pay by bank transfer
- Telephone banking via your bank or building society
- At your bank/building society (where available)
- Cheque by post
- Directly from the deceased's bank/NS&I using the Direct Payment Scheme (form IHT423)
- (Less common) British government stock or qualifying national heritage property (special rules apply)
Keep your HMRC reference to hand; online and bank payments need it for allocation.
Available for certain assets including:
- Land and buildings
- Shares giving control of a company
- Unquoted shares (in some cases)
- Business assets
For qualifying assets, you can spread inheritance tax payments over 10 years in equal annual installments.
Checklist:
- You must elect to pay by instalments on the IHT400 (and related schedules).
- HMRC usually charges interest on outstanding instalments.
- If the asset is sold or transferred, the remaining IHT generally becomes payable immediately.
Key Features:
- 10 equal annual payments
- Interest charged on outstanding balance
- First payment due by normal deadline
- Can pay off early without penalty
Important Notes:
- Must apply for installment option
- Interest still accrues on unpaid amount
- If asset is sold, remaining tax becomes due
- Not available for all types of assets
Some trusts have different timelines and charges (e.g., 10-year anniversaries and exit charges). Check the trust's specific deadlines and forms if the estate includes trust property.
Special Circumstances
If you're unable to pay the inheritance tax bill, HMRC may consider:
- Time to pay arrangements
- Payment by assets (in exceptional cases)
- Acceptance of heritage assets in lieu of tax
Important: Contact HMRC as soon as possible if you anticipate payment difficulties. They're more likely to be helpful if you contact them before the deadline.
In most cases, you need to pay inheritance tax before you can get probate. However, this creates a practical problem - you often need probate to access the deceased's assets to pay the tax.
Solutions include:
- Using your own funds temporarily
- Borrowing against the estate
- Direct payment scheme for some bank accounts
- Installment payments for qualifying assets