Who pays, when to pay and how to pay Inheritance Tax

When someone dies, their estate may become liable to pay Inheritance Tax (IHT). The responsibility for calculating any tax due and ensuring it’s paid falls to the executor (if there’s a Will) or an administrator (if there isn’t).

This can be daunting – particularly for those unfamiliar with estate administration, who are often also dealing with the grief of losing a loved one. The rules around IHT and probate can be complex, and one of the first challenges is simply understanding how and when the tax must be paid.

In this blog, we explain the main payment options, what to do if funds aren’t readily available, and how upcoming proposed changes to the rules could help some families alleviate the amount of IHT due.

When is Inheritance Tax due?

Inheritance Tax must be paid within six months of the end of the month in which the person died. For example, if someone dies on 3 January, the deadline is 31 July. This can come around quickly – especially when it may take time to gather information about the estate and calculate the tax due.

If payment is made after the deadline, HMRC will charge interest. This applies even if the delay is due to difficulties in valuing the estate.

In some cases it is appropriate to make a payment on account to HMRC with the funds that are available, to limit the interest that HMRC charge.

Who is responsible for paying IHT?

As the legal duty to settle IHT on an estate falls to the executor (or administrator), then they are personally responsible for ensuring the correct amount is paid to HMRC, and for doing so within the required timeframes.

In some cases, part of the IHT bill may be paid in instalments, particularly where the estate includes non-cash assets like property or business interests. While the instalment option can be useful for beneficiaries who want to retain those assets, it doesn’t transfer responsibility away from the executor.

If a beneficiary agrees to take on the instalment payments (for example, to keep a family home or farm in the family) but then fails to keep up with them, HMRC will pursue the executor for the remaining balance – along with any interest that has accrued. That’s why executors must carefully consider whether the estate has the funds or liquidity to support this option, or whether alternative arrangements are needed.

How can IHT be paid?

There are several ways to pay an Inheritance Tax bill, depending on the circumstances of the estate and the people involved. These include:

Using your own funds

It is possible for an executor to pay the IHT bill from their personal funds. This is usually done either:

As a short-term loan to the estate (repaid once probate is granted), or
because the executor is also a beneficiary and will ultimately receive the funds back from the estate anyway

While this can help reduce interest charges by paying HMRC more quickly, it’s not ideal – few people want to use personal savings to settle someone else’s tax bill.

Using the deceased’s bank accounts – the Direct Payment Scheme

A more common option is to use funds from the deceased’s bank or building society accounts. This is done via HMRC’s Direct Payment Scheme, where the bank releases funds directly to HMRC to cover the IHT due.

This can only be used where:

The account has sufficient funds; and
the scheme is requested when the IHT forms are submitted to HMRC.

This option avoids the need for executors to use their own money, but only works if the person who died had enough in their accounts to cover the bill. If most of the estate is tied up in property or non-cash assets, it won’t be sufficient.

Banks are generally cooperative when it comes to the Direct Payment Scheme. However, they will often freeze the deceased’s accounts as soon as they’re notified of the death, and won’t release funds for other expenses (such as professional fees) until probate has been granted.

Taking out a loan

Another option is to take out a loan to pay IHT. This could be:

An unsecured loan taken out in the executor’s name; or
a secured loan backed by an asset in the estate (though this is harder to arrange without probate).

The decision may come down to comparing interest rates. HMRC currently charges interest at 8.25% (as at 29 May 2025) on late IHT payments, and so a loan could be cheaper in some cases. However, loans come with their own risks and obligations, so it’s important to take advice before committing.

Paying in instalments

Where an estate includes non-cash assets – such as property or a family business – it may not be possible or desirable to sell them quickly to pay the tax. In these cases, HMRC allows IHT to be paid in annual instalments over 10 years.

This is a popular option where families want to keep assets such as:

The family home
A farm or farmland
A trading business

Some key points to note:

The first instalment must still be paid within six months of the end of the month of death – but no interest is charged on that initial payment.
The remaining nine instalments do attract interest in most circumstances.
If the asset is sold during the 10-year period, all remaining tax becomes payable immediately.

This option helps families keep important assets in the short term, however the interest charges can still be significant over time.

What proposed changes have been announced for April 2026?

From April 2026, it is proposed that IHT instalments will be interest-free where they relate to assets that qualify for:

Agricultural Property Relief (APR); or
Business Property Relief (BPR)

If introduced, this change would significantly reduce the cost of holding on to farms or family businesses rather than selling assets quickly to pay tax. It may also lead to more estates choosing to pay in instalments rather than up front, especially in sectors like farming, where cash is often tied up in land and machinery.

At the time of writing, the change is not yet confirmed – but do watch this space. We may see increased awareness and take-up of instalments over the coming years if the proposals are adopted.

Can you make a payment before the full tax bill is known?

The short answer – yes.

As interest starts to accrue after six months, executors often choose to make a payment on account before they’ve finalised the full value of the estate. This is especially common where it’s clear that IHT will be due, even if the exact figure isn’t known.

Making a payment on account helps reduce the overall interest liability and shows HMRC that the estate is engaging with the process. Further payments can then be made once the estate has been valued in full.

What can executors do to prepare?

The best thing they can do is seek advice early. This may mean working with a solicitor, tax adviser, or probate specialist who can guide them through the IHT and probate processes. Acting quickly helps avoid delays, manage interest charges, and reduce stress – particularly when it’s the first time someone has taken on this kind of legal responsibility.

How can Price Bailey help?

If you’re acting as an executor and are unsure of your responsibilities, or want to understand your options for paying the IHT bill, our team can help.

We work closely with executors, families, and other professional advisers to support every step of the process – from calculating tax liabilities to planning instalments and dealing with HMRC

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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