When do you pay inheritance tax in the UK is a question defined by a strict six-month window. HMRC requires the full balance to be settled by the final day of the sixth month following the individual’s death. For instance, if a death occurs in March, the tax must be received by 30 September to prevent automatic interest charges.

For a death in March, the payment is due by 30 September. Inheritance Tax is a levy on the estate of someone who has passed away, encompassing their property, money, and possessions.

While the tax is calculated on the total value of these assets, the payment timeline is strict. Most executors must arrange payment before the probate registry grants access to the deceased’s bank accounts.

When do you pay inheritance tax in the UK?

The deadline for paying Inheritance Tax is the last day of the sixth month following the month of death.

If you miss this window, HM Revenue and Customs (HMRC) will begin charging interest on the outstanding balance from the first day of the seventh month, regardless of whether probate has been granted.

The Executor Accountability Window

In practice, the timing is often dictated by the need for a Grant of Probate or Letters of Administration. You cannot usually collect or sell the deceased’s assets until you have this legal document.

However, the Probate Registry will not issue the grant until they receive confirmation from HMRC that the tax has been paid, or at least a structured payment plan is in place.

What is Inheritance Tax and why was it introduced?

Inheritance Tax (IHT) is a tax on the transfer of wealth upon death. It is designed to redistribute wealth and generate revenue for public services.

While often called a death tax, it serves as a mechanism to ensure that very large accumulations of capital contribute back to the national economy.

Modern Inheritance Tax was introduced in its current form in 1894 by Sir William Harcourt, the then Chancellor of the Exchequer. It replaced a series of older death duties with a single Estate Duty.

Harcourt’s goal was to tax the wealthy more effectively to fund rising naval costs. Over the decades, it evolved through the Capital Transfer Tax of the 1970s into the modern IHT framework we navigate today.

While this tax focuses on long-term wealth transfer, many families also balance these obligations against immediate financial pressures, often relying on current state support like the July 2025 cost of living payment to manage household liquidity during the probate process.

How much are the Inheritance Tax thresholds and rates?

Most estates do not pay IHT because they fall below the Nil-Rate Band (NRB). As of 2026, the standard threshold remains £325,000.

If an estate is worth less than this, or if everything is left to a spouse or civil partner, there is usually no tax to pay, though you must still report the figures to HMRC.

Threshold Type	Value (2026)	Purpose
Nil-Rate Band (NRB)	£325,000	Standard tax-free allowance for all individuals.
Residence Nil-Rate Band (RNRB)	£175,000	Extra allowance when passing a home to direct descendants.
Total Combined Threshold	£500,000	Maximum tax-free limit for a single person.
Married Couple Total	£1,000,000	The combined limit if both allowances are transferred.

The standard tax rate is 40% on anything above these thresholds. However, if you leave at least 10% of the net estate to charity in your will, the rate on the remainder drops to 36%.

Pros and cons of the UK Inheritance Tax system

Understanding the advantages and disadvantages of this tax helps in navigating the emotional and financial complexity of estate administration.

Advantages	Disadvantages
Fund public services like the NHS and education.	Often perceived as double taxation on earned income.
Reduces wealth inequality across generations.	Can force the sale of family homes or businesses.
Encourages charitable giving through lower tax rates.	High administrative burden for grieving executors.
Provides exemptions for spouses and civil partners.	High interest rates on late payments (7.75% in 2026).

When should you worry about an Inheritance Tax bill?

You should begin planning for IHT if the combined value of your assets, including your home, savings, and investments, exceeds £325,000.

For parents who own their home and intend to leave it to their children, the worry threshold effectively rises to £500,000. Before paying a penny to HMRC, you must perform a pre-payment checklist to ensure you aren’t overpaying. This level of diligent estate mapping ensures you don’t miss out on available allowances.

In a shifting economic climate, keeping a close eye on all potential income streams, from estate reliefs to broader benefits like the Universal Credit £420 boost, is the most effective way to protect a family’s overall net monthly position.

A common pattern is for executors to forget to deduct debts, such as outstanding mortgages, funeral expenses, or unpaid utility bills, which all reduce the taxable value of the estate.

Checklist before making a payment

1. Verify if the estate qualifies as an excepted estate (no tax due).
2. Obtain a formal valuation for all property and land.
3. Apply for an IHT reference number at least three weeks in advance.
4. Calculate any taper relief on gifts made in the last 7 years.
5. Identify any Business or Agricultural Reliefs (subject to 2026 caps).
6. Confirm if the deceased used their full Nil-Rate Band or if a spouse’s unused band can be transferred.

Can I gift money to my son or daughter tax-free?

As a parent, you can gift money to your children, but the timing of these gifts determines if they are eventually taxed. Most gifts fall under the 7-year rule.

If you live for seven years after making the gift, it is entirely tax-free regardless of the amount. If you die within that period, the gift is added back into your estate’s value.

• Annual Exemption: You can give away £3,000 total each year tax-free.
• Small Gift Allowance: You can give up to £250 to as many people as you like.
• Wedding Gifts: Parents can give up to £5,000 to a child getting married.
• Surplus Income: You can make regular gifts if they come from your post-tax income and do not affect your standard of living.

Do I need to pay Inheritance Tax on my parents property?

Whether you pay tax on a parental home depends on the total estate value and how the property is handled. The Residence Nil-Rate Band (RNRB) provides an extra £175,000 of protection, but only if the home is left to direct descendants (children or grandchildren).

Navigating the specifics of inheritance tax when second parent dies is particularly crucial here, as this is often when the bulk of the family home’s value is officially assessed for duty.

When reviewing decisions made by HMRC, it is clear that Gifts with Reservation of Benefit are a major trap.

If your parents give you their house but continue to live in it rent-free, HMRC will treat the house as if they still owned it. To avoid this, they must pay you a market-rate rent, and you must pay income tax on that rent.

How to get maximum benefits and avoid Inheritance Tax legally

To reduce the burden on your beneficiaries, you should utilize all available exemptions and reliefs. Strategic planning can significantly lower the effective tax rate of a large estate.

1. Use Trusts: Assets held in certain trusts may sit outside your estate for IHT purposes.
2. Life Insurance: Policies written under trust pay out directly to beneficiaries without being taxed as part of the estate.
3. Charitable Donations: Leaving 10% of your estate to charity reduces your overall tax rate from 40% to 36%.
4. Business Property Relief (BPR): Ensure business assets qualify for relief, though keep in mind the 2026 reform, which caps 100% relief at £1 million.
5. Spend the Estate: Some individuals choose to lower their estate’s value by spending on experiences or life improvements while they are still healthy.
6. Regular Gifting: Utilizing the surplus income rule allows for the transfer of significant wealth over time without hitting the 7-year rule.

However, before committing to large-scale gifting, it is a matter of practical safety to determine exactly how much do i need to retire to ensure your own long-term care and standards of living remain fully funded.

This prevents a situation where tax efficiency comes at the cost of your own future financial stability.

What is the best way to pay the inheritance tax bill?

If the estate is illiquid, meaning it consists of a house but very little cash, HMRC allows you to pay in 10 annual instalments. This is particularly helpful for family homes or farms.

Where and how to make a payment

You must pay the tax to HMRC using your 13-character IHT reference number. Payments can be made via:

• Online bank transfer (the fastest method).
• The Direct Payment Scheme (DPS), which allows a bank to pay HMRC directly from the deceased’s accounts.
• Payments on account (making an estimated payment early to stop the interest clock).

Common mistakes executors make when they pay inheritance tax

Managing an estate is a high-pressure task, and errors can be costly both in terms of tax and legal liability.

1. Missing the 6-month deadline: This is the most frequent error, leading to automatic interest charges that cannot be waived.
2. Ignoring lifetime gifts: Failing to account for bank transfers made by the deceased in the seven years before death can lead to underpayment penalties.
3. Miscalculating the RNRB: Assuming the residence allowance is automatic; it must be specifically claimed on the IHT400 form.
4. Incorrect Valuations: Using estimated values for property instead of professional RICS valuations, which invites HMRC investigations.
5. Not checking for a spouse’s unused band: Forgetting that a widow or widower can often claim their late partner’s unused tax-free threshold.
6. Paying from personal funds: Executors are not usually required to pay the tax from their own pocket; using the Direct Payment Scheme is almost always a better option.

Executor Roadmap: Managing the 2026 Deadlines

Administering a loved one’s estate is a delicate balance of legal compliance and personal transition.

Your immediate priority is securing an IHT reference number to ensure that when do you pay inheritance tax, the transaction is recorded accurately by HMRC. Missing the six-month cutoff is an avoidable expense that can significantly diminish the final inheritance.

FAQ

Can I pay inheritance tax before probate is granted?

Yes. In fact, you generally must pay at least a portion of the tax before the Grant of Probate is issued. Most banks will release funds to HMRC directly for this purpose.

Does interest on IHT change in 2026?

HMRC interest rates are variable and usually sit 2.5% above the Bank of England base rate. As of early 2026, executors should budget for rates around 7.75% for late payments.

Is an ISA exempt from inheritance tax?

No. While ISAs are tax-free for income and capital gains during your life, they are fully taxable as part of your estate when you pass away.

Whom should I approach to clarify doubts on inheritance tax?

You should consult a solicitor specializing in probate or a STEP-qualified accountant (Society of Trust and Estate Practitioners). HMRC also operates a dedicated IHT helpline for basic procedural queries.

What happens if the estate has no cash?

You can apply for a Grant on Credit from HMRC in exceptional circumstances where assets are completely frozen.

During the months it takes to settle an estate, executors often look for ways to bridge personal financial gaps, including checking eligibility for specific support like the Universal Credit loophole £1500 to maintain stability while waiting for probate.

Do I pay tax on a gift immediately?

Only if it is a Lifetime Chargeable Transfer into a trust that exceeds £325,000. Otherwise, most gifts are only taxed if the donor dies within seven years.

Can I pay the tax early to save money?

You can make a payment on account as soon as you have a reference number. This stops interest from accruing on that amount, even if you haven’t finished the final valuation.