Who Pays Inheritance Tax?

Key facts

The personal representatives (executors or administrators) are responsible for paying IHT on the estate.
IHT on gifts made within 7 years of death is normally paid by the recipient of the gift.
Trustees pay IHT on assets held in relevant property trusts (e.g. discretionary trusts).
Beneficiaries do not pay IHT directly, but the estate’s IHT bill reduces their inheritance.
HMRC can pursue beneficiaries who have received assets if the PRs fail to pay.

Who Is Responsible for Paying IHT?

Inheritance Tax is not a tax that falls on one single person. Liability depends on the type of transfer and the assets involved. In practice, different parties can be responsible for different portions of the IHT bill.^[1]

Type of Transfer	Who Pays IHT
The estate on death	Personal representatives (executors/administrators)
Gifts within 7 years of death (PETs)	The recipient of the gift (primarily)
Gifts into trust (CLTs)	The trustees, or the person making the gift
Trust assets (10-year and exit charges)	The trustees
Jointly owned assets passing by survivorship	The surviving joint owner / the estate

Personal Representatives

The personal representatives (PRs) are the people legally responsible for administering the estate. They may be:^[3]

Executors — named in the will
Administrators — appointed by the court when there is no will (intestacy)

PRs must:

Value all assets and liabilities in the estate
Complete the IHT400 form (or confirm the estate is excepted)
Pay the IHT due — most must be paid before probate is granted
File any additional information HMRC requests
Distribute the estate after IHT and other liabilities are settled

PRs are personally liable for the IHT. If they distribute assets before paying the full IHT due, HMRC can pursue them individually.

IHT on Lifetime Gifts

When someone makes a potentially exempt transfer (PET) — typically a gift to another individual — and dies within 7 years, IHT may become due on the gift. The primary liability falls on the recipient of the gift.^[1]

If the recipient cannot pay, liability passes to the personal representatives of the estate. The order of liability is:

The person who received the gift
The personal representatives of the donor’s estate
Any other person in whom the property is vested

Tip: If a gift was made more than 3 years before death, taper relief reduces the IHT rate on the gift. After 7 years, PETs become fully exempt.

IHT on Trust Assets

Trustees are liable for IHT on:

Entry charges — when assets are transferred into a relevant property trust and the value (combined with other CLTs in the previous 7 years) exceeds the nil-rate band
10-year anniversary charges — periodic charges on relevant property trusts
Exit charges — when capital leaves the trust

If the trustees fail to pay, HMRC can pursue the settlor (while alive) or the beneficiaries who received the trust property.^[3]

Jointly Owned Assets

How IHT applies to jointly owned assets depends on the type of ownership:

Ownership Type	What Happens on Death	IHT Treatment
Joint tenants	Passes automatically to the survivor by “right of survivorship”	The deceased’s share is included in their estate for IHT. If the survivor is a spouse, the spouse exemption applies.
Tenants in common	The deceased’s share passes according to their will or intestacy rules	The deceased’s share is included in their estate. The PRs are liable for IHT on this share.

Can Beneficiaries Be Pursued?

In general, beneficiaries are not directly liable for the estate’s IHT. However, HMRC can pursue a beneficiary who has already received assets from the estate if the PRs fail to pay the full IHT due. Each beneficiary is liable up to the value of the assets they received.^[2]

Practical point: Beneficiaries should be cautious about putting pressure on executors to distribute assets quickly. If the IHT position is not finalised and HMRC later raises a further assessment, distributed assets may need to be recovered.

How the Will Affects Who Bears the Tax

A will can specify how IHT is allocated between beneficiaries:

Gifts “free of tax” — the IHT is borne by the residuary estate, reducing what the residuary beneficiaries receive
Gifts “subject to tax” — the recipient bears the IHT on their specific gift
No direction — the default rules apply: IHT on the estate is paid from the residuary estate

This is an important area of will planning. The way IHT is allocated can significantly affect the net amount each beneficiary receives.

Frequently Asked Questions

Do beneficiaries have to pay Inheritance Tax?

Beneficiaries do not normally pay IHT directly. The tax is paid from the estate by the personal representatives before assets are distributed. However, if a specific gift is left in a will “free of tax”, the remaining estate bears the IHT, which reduces other beneficiaries’ shares.

Who pays IHT on lifetime gifts?

If the donor dies within 7 years of making a potentially exempt transfer (PET), IHT on the gift is primarily the responsibility of the person who received it. If they cannot pay, HMRC can look to the personal representatives of the estate.

What happens if the executors cannot pay the IHT?

HMRC can pursue anyone who received assets from the estate (including beneficiaries and gift recipients) if the personal representatives cannot pay. Each person is liable up to the value of the assets they received.

Is IHT paid before or after probate?

Most of the IHT due must be paid before the grant of probate is issued. The personal representatives typically need to arrange funding (sometimes through a bank direct payment scheme or by selling assets) to pay the IHT, then use the grant to access the remaining estate assets.

Sources

How Inheritance Tax works: thresholds, rules and allowances — GOV.UK
Inheritance Tax: payments — GOV.UK
Inheritance Tax Manual: IHTM10000 – The charge to tax — HMRC