When Does Inheritance Tax Have to Be Paid?

Inheritance tax has a firm deadline: it must be paid by the end of the sixth month after the month in which the person died. If someone dies on 10 January, the tax is due by 31 July. Miss that date and HMRC charges interest on the unpaid amount for every day it is late. There is one important wrinkle, for estates that need a grant of probate, the tax often has to be paid before probate is granted, which creates a timing puzzle we explain below.

The six-month deadline

The clock runs from the end of the month of death, not the date of death itself, and gives the estate six clear months. In practice, personal representatives should aim to submit the inheritance tax account (form IHT400) and arrange payment well within that window. For many estates the paperwork alone takes weeks, so it pays to start valuing assets early. Our complete guide to inheritance tax planning walks through the reporting process step by step.

The probate catch-22

Here is the awkward part. For most estates that owe inheritance tax, HMRC will not issue the reference the executor needs to apply for probate until the tax is at least partly paid, yet the executor often cannot access the deceased’s money to pay it until probate is granted. It is a genuine chicken-and-egg problem, and it catches many families off guard in the weeks after a bereavement. To break this deadlock there are a few routes, set out below, and the right one depends on where the estate’s money is held.

• 1

  Direct Payment Scheme

  Banks and building societies can release funds directly from the deceased’s accounts to HMRC to pay the tax, without waiting for probate.

• 2

  National Savings and government stock

  Money held in NS&I products or government stock can also be used directly towards the bill.

• 3

  Pay tax on some assets by instalments

  Tax on property, certain shares and businesses can be spread over ten annual instalments (see below).

• 4

  A short-term or executor’s loan

  Some estates borrow to pay HMRC, then repay once assets are sold or probate releases the funds.

Paying by instalments

Some assets are hard to turn into cash quickly, a house, a share of a business, or certain unquoted shares. For these, HMRC lets you pay the inheritance tax in ten equal annual instalments, with the first due by the usual six-month deadline. It buys time, but it is not free: interest is added to the outstanding balance on most assets, though qualifying agricultural and business property can be an exception. If the asset is sold, any remaining instalments become payable at once. Because a home is often the largest asset, this option matters, see our guide on reducing inheritance tax legally and the inheritance tax planning overview.

What happens if you pay late

If the tax is not paid by the deadline, HMRC charges interest from the day after the due date until it is settled. The rate is tied to the Bank of England base rate, so it moves over time, and it applies even if the delay is caused by the probate process or a slow property sale. Interest is not a penalty, but it adds up on a large estate and cannot usually be avoided once the deadline has passed. Separately, penalties can apply for filing the inheritance tax account late or for careless errors in the valuation. Keeping to the timetable, and making a payment on account if you are unsure of the final figure, keeps these costs down, and any overpayment is refunded with interest once the true figure is agreed.

If the estate ends up overpaying, for example because assets later sell for less than their probate value: the difference can be reclaimed, and relief is available where shares or land are sold at a loss within set periods. This is information, not personal advice, and the figures here can change, so a probate solicitor or an inheritance tax specialist is usually worth their fee on a larger estate.

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