Paying IHT (Instalments Option)

Key facts

IHT is due 6 months from the end of the month in which the person died.
Interest is charged on any IHT not paid by the deadline, even if the instalment option is used.
The 10-year instalment option is available for qualifying assets: land, property, certain shares, and business interests.
The Direct Payment Scheme allows IHT to be paid from the deceased’s bank accounts before probate.
Executors can also pay by bank transfer, cheque, or through the deceased’s savings (NS&I).

When Is IHT Due?

Inheritance Tax must be paid within 6 months from the end of the month in which the person died. Interest is charged from this date on any unpaid tax.^[1]

For example:

Date of Death	IHT Payment Deadline
15 January 2026	31 July 2026
3 June 2026	31 December 2026
28 October 2025	30 April 2026

Key point: In practice, executors usually need to pay IHT before probate is granted, since the probate registry requires confirmation that IHT has been paid. This often means paying within 3–4 months of death.

Payment Methods

IHT can be paid by several methods:^[1]

Direct Payment Scheme — funds transferred directly from the deceased’s bank accounts to HMRC (see below)
Bank transfer (CHAPS/Faster Payments) — using HMRC’s bank details and IHT reference number
Cheque — made payable to “HM Revenue and Customs” with the IHT reference on the back
NS&I — National Savings products can be repaid directly to HMRC
Acceptance in lieu — HMRC may accept heritage items (art, artefacts, land) in place of IHT

The Direct Payment Scheme

The Direct Payment Scheme solves the “chicken and egg” problem of needing to pay IHT before probate is granted. It works as follows:^[3]

Complete form IHT423 for each bank or building society holding the deceased’s funds
Include the HMRC payment reference from the IHT400
Send the form to the bank (along with the death certificate)
The bank transfers the specified amount directly to HMRC
HMRC issues a receipt, which is used for the probate application

The 10-Year Instalment Option

For certain types of asset, the personal representatives can elect to pay IHT in 10 equal annual instalments instead of a single lump sum. The first instalment is due by the normal 6-month deadline.^[2]

Qualifying Assets

Land and property (freehold or leasehold)
Business or partnership interest
Shares or securities giving control of the company (>50% voting rights)
Unquoted shares (meeting certain conditions)
Timber subject to woodland relief

Interest on Instalments

Asset Type	Interest Treatment
Land, property, and some business assets	Interest only on late instalments (no interest on future instalments)
Shares and securities	Interest on the full outstanding balance from the due date

Important: If a qualifying asset is sold, all remaining instalments become due immediately. The instalment option is designed for estates that are asset-rich but cash-poor — once the asset is liquidated, the full tax must be paid.

IHT Interest Rates

HMRC charges interest on late IHT payments. The interest rate is set by legislation and follows Bank of England base rate changes. The current rate can be checked on GOV.UK. Interest runs from the payment deadline (6 months from end of month of death) until payment is received.^[2]

Conversely, if HMRC owes a refund (e.g. after an estate is re-valued downwards), interest is paid on the overpayment from the date of payment to the date of refund, but at a lower “repayment” rate.

Frequently Asked Questions

When must IHT be paid?

IHT is due 6 months from the end of the month in which the person died. For example, if someone dies on 10 May, the IHT is due by 30 November. Interest accrues from the due date on any unpaid balance, even if you have elected to pay by instalments.

What is the instalment option?

For qualifying assets (mainly land, property, controlling shareholdings, and unquoted shares), you can elect to pay the IHT in 10 equal annual instalments. The first instalment is due by the normal 6-month deadline. Interest is charged on the outstanding balance, though for some assets (notably land and property), interest is only charged on late instalments.

What happens if the asset is sold?

If a qualifying asset subject to the instalment option is sold, all remaining instalments become due immediately. This is because the instalment option is designed to help when the estate is asset-rich but cash-poor — once the asset is sold, the cash is available to pay the tax.

How do I use the Direct Payment Scheme?

Contact the deceased’s bank with a completed IHT423 form (or the bank’s own bereavement form) and the HMRC payment reference from the IHT400. The bank will transfer funds directly to HMRC. This allows IHT to be paid before probate is granted.

Sources

Paying Inheritance Tax — GOV.UK
IHTM30000 – Payment of tax — HMRC
Pay Inheritance Tax from the deceased’s bank account — GOV.UK