Getting the Inheritance Tax Bill Paid

Right, you've worked out the Inheritance Tax (IHT) due. Now comes the practical bit: getting HMRC paid. This needs timely action to avoid extra costs. It might seem daunting, especially if the estate doesn't have much ready cash, but there are clear ways forward. Let's break it down.

The Crucial Deadline: Don't Be Late

HMRC sets a firm deadline for paying IHT. You need to pay by the end of the sixth month after the person died.

• Example: If the person died anytime in March 2025, the IHT payment deadline is 30th September 2025.
• Why it Matters: Miss this deadline, and HMRC will start charging interest on the amount owed. The interest rate is typically the Bank of England base rate plus 2.5%, so it quickly adds up. Getting it paid on time saves the estate money.

How to Pay the Tax Bill

You've got a few routes to get the payment sorted.

1. Using Money from the Estate's Bank Accounts (Direct Payment Scheme)

This is often the simplest way if the deceased had enough cash in their accounts. You don't need the Grant of Probate yet to do this.

• How: Fill in form IHT423 (Application for a Direct Payment Scheme reference number) and send it to HMRC. Once you have the reference number, you give this and a completed form IHT423 to each bank or building society holding the deceased's money. They can then pay HMRC directly from the accounts.
• Our Take: It’s efficient and uses the estate’s own funds without you needing probate first. A smart move if the cash is there.

2. Paying from Your Own Pocket (and Reclaiming Later)

You can pay the IHT yourself and then reclaim the amount from the estate once you have the Grant of Probate and access to the assets. This is sometimes necessary to meet the deadline quickly but depends on your personal financial situation.

What If There Isn't Enough Cash Available?

It's common for estates, especially those with valuable property but little cash, to face this issue. Don't worry, you have options:

1. Selling Assets Like Shares

If the estate holds shares or other investments, you might be able to sell some before probate is granted, specifically to pay IHT. Stockbrokers can often facilitate this; check with them about their process.

2. Arranging an Executor's Loan

You can arrange a short term loan specifically to cover the IHT bill.

• How: Approach banks or specialist financial institutions. Explain you need an 'executor loan' or 'probate loan' to pay IHT. They understand the situation and that the loan will be repaid once the Grant of Probate is issued and assets can be accessed or sold.
• Keep Records: The interest paid on such a loan is usually a deductible expense for the estate. Keep all loan paperwork meticulous.

Paying IHT in Instalments: Breathing Space for Property

Good news if a large chunk of the IHT relates to assets that take time to sell, like property or certain business interests. You can choose to pay the tax on these specific assets in ten equal annual instalments.

• How it Works: The first instalment is due by the normal deadline (end of the sixth month after death). The remaining nine instalments are paid annually after that.
• Interest Applies: Be aware that HMRC charges interest on the outstanding balance from the second instalment onwards.
• Flexibility: You can choose to pay off the remaining instalments early if, for instance, the property is sold.

Resource: For full details on payment methods, deadlines, and instalments, check the official guidance on the GOV.UK website under 'Paying Inheritance Tax'.

Wrapping Up

Paying IHT is a significant milestone in the probate process. Knowing the deadline and the payment options, including the Direct Payment Scheme and instalment plans, gives you control. If cash flow is tight, remember loans or asset sales are standard solutions.

You are managing this task by task. Getting the tax paid allows you to move forward with confidence. We are here to help you navigate what comes next.