Inheritance tax: Who pays it, and when does it have to be paid?
Inheritance tax (IHT) is one of those topics families often ignore until faced with it directly. When someone passes away, questions quickly arise: Who is responsible for paying the tax? When must it be settled?
And how can the estate ensure the bill doesn’t create financial stress for beneficiaries? This guide explains the rules clearly, with practical examples and key points for wealthy families to consider.
Who pays inheritance tax?
When someone dies with a will, the executor named in the document is responsible for dealing with the estate, including IHT. If there is no will, an administrator is appointed. In both cases, the role includes valuing the estate, calculating the IHT due, and ensuring HMRC is paid.
Beneficiaries do not normally pay IHT directly. They receive what remains after the estate has settled its liabilities. However, if the estate is structured in certain ways — for example, with lifetime gifts where the donor dies within seven years — beneficiaries may become responsible for part of the bill.
When must inheritance tax be paid?
Inheritance tax must be paid by the end of the sixth month after death. For example, if someone dies in January, IHT is due by the end of July. After this point, HMRC begins charging interest.
IHT usually has to be paid before probate is granted. This can create a practical challenge: funds are needed to pay HMRC, but assets may not yet be released. The Direct Payment Scheme can help bridge this gap.
Banks and building societies can transfer money directly from the deceased’s accounts to HMRC to settle part or all of the IHT bill. This avoids executors needing to raise funds personally before probate is granted. Not all accounts are eligible, but most mainstream providers support the scheme.
For estates that include property, family businesses, or certain investments, it may be possible to pay IHT in ten annual instalments. This option is often used when the estate is asset-rich but cash-poor.
What happens if inheritance tax is not paid on time?
Interest accrues from the due date at a rate of 7.5%. HMRC also has powers to pursue executors or, in some cases, beneficiaries for unpaid amounts. Delays can increase costs significantly and strain family relationships, especially when valuable assets like homes or businesses are at stake.
Factors to consider for your estate
- Do my executors know they are responsible for paying inheritance tax?
- Have I structured my estate to ensure there is enough liquidity to pay the bill without selling key assets?
- Do I have life insurance or a trust arrangement in place to provide cash for IHT if needed?
- Would my estate qualify for paying tax in instalments, and should this be part of my plan?
- Have I reviewed the deadlines and processes with professional advisers so my family isn’t caught by surprise?
Summary: Who pays inheritance tax, and when does it have to be paid?
Inheritance tax is paid by the estate, not usually by individual beneficiaries. Executors or administrators carry the legal responsibility, and the bill is due by the end of the sixth month after death.
Payment is required before probate is granted, though schemes exist to pay directly from bank accounts or in instalments when assets are tied up in property.
Planning ahead — with liquidity, insurance, or professional guidance, ensures the tax can be settled smoothly and avoids adding financial stress at a difficult time.
Related reading: HMRC & Inheritance Tax – The Facts
Frequently asked questions
Keen to learn more? Have a read of these relevant FAQs on the topic of inheritance tax, who pays it, when it is paid and some of the regulations.
Who is liable to pay inheritance tax?
Inheritance tax is usually paid by the executor of the estate using funds from the deceased’s assets. Beneficiaries don’t normally pay it themselves, though certain gifts made within seven years of death may be taxable. If the estate’s value exceeds the nil-rate band, inheritance tax is due before assets are distributed.
How much money can you inherit without paying tax in the UK?
In the UK, you can usually inherit up to £325,000 tax-free under the nil-rate band. If the estate includes a main residence left to direct descendants, the allowance may rise to £500,000. Any amount above these thresholds is generally taxed at 40%, although exemptions and reliefs may reduce the liability.
Do I pay inheritance tax on my parents’ house?
You might pay inheritance tax on your parents’ house if the total estate value exceeds the available allowances. When the property is left to children or grandchildren, the residence nil-rate band applies, which can raise the threshold to £500,000. Transfers between spouses or civil partners are fully exempt from inheritance tax.
What is the maximum amount you can inherit without paying taxes?
The maximum amount you can inherit tax-free depends on your relationship to the deceased and how the estate is structured. For most estates, the combined nil-rate and residence nil-rate bands allow up to £500,000 to pass tax-free. Married couples or civil partners can transfer unused allowances, potentially doubling this figure.
Does inheritance tax have to be paid before probate is granted?
Yes, at least part of the inheritance tax must usually be paid before probate is granted. HMRC requires payment within six months of the person’s death. Executors often use funds held by the deceased’s bank or through a short-term loan to settle the tax before receiving full access to the estate.
How long until you have to pay inheritance tax?
Inheritance tax must generally be paid within six months of the end of the month in which the person died. If payment is late, HMRC charges interest on the outstanding amount. Executors can sometimes pay in instalments, especially where the estate includes property or other illiquid assets.
