Can You Pay Inheritance Tax in Instalments? Our Guide

Last reviewed: 24 May 2026 by the MP Estate Planning editorial team. Jurisdiction: England and Wales. Scotland and Northern Ireland have different probate and intestacy rules; the IHT thresholds are UK-wide.

Dealing with inheritance tax can be overwhelming, especially when coping with the loss of a loved one. At such times, understanding your payment options is crucial.

We appreciate that managing inheritance tax effectively is a significant concern for many British homeowners. Our guide will walk you through the process of paying inheritance tax in instalments, helping you to manage your financial obligations.

We’ll explore the eligibility criteria and the implications of paying in instalments, ensuring you’re well-equipped to make informed decisions about your estate planning.

Key Takeaways

• Understand the eligibility criteria for paying inheritance tax in instalments.
• Learn about the application process and required documentation.
• Discover the implications of paying inheritance tax in instalments on your estate.
• Explore alternatives to instalment payments for inheritance tax.
• Gain insights into managing your financial obligations effectively.

Understanding Inheritance Tax in the UK

Understanding inheritance tax is crucial for managing your estate’s financial obligations. Inheritance tax is a complex topic, and navigating its intricacies can be challenging. However, with the right guidance, you can make informed decisions to protect your loved ones from unnecessary financial burdens.

What is Inheritance Tax?

Inheritance tax is a tax on the estate of someone who has passed away, including properties, cash, investments, and other assets. The standard rate is 40% on the value above the nil-rate band (£325,000 (gov.uk — Inheritance Tax)). For instance, if the estate is valued at £500,000, the inheritance tax would be calculated on the amount above £325,000, which is £175,000 (gov.uk — RNRB). The tax due would be £70,000 (40% of £175,000).

To put this into perspective, consider the following example:

• Estate value: £500,000
• Nil-rate band: £325,000
• Taxable amount: £175,000
• Inheritance tax: £70,000

When is Inheritance Tax Due?

Inheritance tax is usually due by the end of the sixth month after the person’s death. For example, if someone passes away on January 1st, the inheritance tax would need to be paid by July 31st. Late payments can incur penalties, so it’s essential to plan accordingly. You can find more information on payment deadlines and requirements on our website, specifically in our article on whether you can pay inheritance tax in.

Who is Responsible for Paying It?

The executors or administrators of the estate are responsible for paying inheritance tax. They must ensure that the tax is paid before distributing the estate to beneficiaries. This responsibility can be significant, and understanding the options for inheritance tax payment arrangements is vital for managing the estate’s financial obligations effectively.

For more detailed guidance on managing inheritance tax payments and understanding your obligations, it’s advisable to consult with professionals who specialize in estate planning.

Payment Options for Inheritance Tax

The UK’s inheritance tax system offers various payment options to help ease the financial strain on families. Understanding these options is crucial for managing your financial obligations effectively.

Can You Pay Inheritance Tax in Instalments?

Yes, you can pay inheritance tax in instalments under certain conditions. For instance, if the estate includes assets like land or specific types of shares that are not easily liquidated, you may be able to pay the tax over 10 years. This flexible payment option can significantly ease the financial burden on those responsible for settling the estate.

To qualify for instalment payments, the estate must meet specific criteria. Typically, this includes having assets that are not readily convertible to cash, such as property or certain investments. We will outline the exact criteria later in this section.

Payment Deadlines and Requirements

While instalment payments can offer relief, it’s essential to understand the payment deadlines and requirements. Generally, the initial inheritance tax payment is due within six months of the deceased’s passing. If you’re paying in instalments, you’ll need to adhere to the agreed-upon schedule to avoid penalties.

Key Points to Remember:

• The initial payment is due within six months of the deceased’s passing.
• Instalment plans can be arranged for certain types of assets.
• Payments must be made according to the agreed schedule to avoid penalties.

It’s also important to note that interest may be charged on outstanding inheritance tax amounts. Therefore, it’s crucial to plan carefully and consider seeking professional advice to ensure compliance with all requirements.

Eligibility for Instalment Payments

Eligibility for instalment payments on Inheritance Tax depends on several key factors related to the estate’s composition.

Who Can Apply for Instalment Payments?

To qualify for spreading Inheritance Tax payments, the estate must comprise certain assets. These typically include:

• Land or property
• Certain types of shares
• Business assets

These assets must be of significant value to be considered for an instalment plan for Inheritance Tax.

Criteria for Instalment Payment Approval

The HMRC sets specific criteria for approving instalment payments. The application must be made on the Inheritance Tax Account form IHT400.

As noted by HMRC, “If you’re paying Inheritance Tax by instalments, you’ll need to make sure you pay the correct amount on time” (

Source: GOV.UK

). This emphasizes the importance of understanding the eligibility criteria and adhering to the payment schedule.

The Application Process

Navigating the application process for inheritance tax instalments can be complex, but we’re here to guide you through it. Applying for instalment payments involves several steps and requires specific documentation.

How to Apply for Instalment Payments

To apply for instalment payments, you’ll need to complete the Inheritance Tax Account form IHT400 and indicate your wish to pay in instalments. This form is crucial as it provides HMRC with the necessary details about the estate’s assets and the tax due.

When filling out the form, ensure you:

• Provide detailed information about the estate’s assets, including property, investments, and other relevant holdings.
• Clearly state your request to pay inheritance tax in instalments.
• Include any additional documentation required to support your application.

Required Documentation

The documentation required for applying for instalment payments includes:

• The completed IHT400 form.
• Detailed valuations of the estate’s assets.
• Any other relevant financial information.

It’s essential to ensure that all documentation is accurate and comprehensive to avoid delays in processing your application.

Timeline for Processing Applications

The timeline for processing inheritance tax instalment applications can vary depending on the complexity of the estate and the completeness of the submitted documentation.

To manage your inheritance tax payments effectively, it’s crucial to plan ahead and understand the application process. By doing so, you can ensure that your estate meets its tax obligations in a manageable way.

Calculating Inheritance Tax

To navigate the complexities of inheritance tax, it’s essential to grasp how it’s calculated. Understanding the calculation process can help you make informed decisions about your estate planning.

How is Inheritance Tax Calculated?

Inheritance tax is calculated based on the value of the estate’s assets, minus any allowances and deductions. The process involves several steps:

• Valuing the estate’s assets, including property, investments, and personal belongings.
• Applying the nil-rate band and residence nil-rate band, if applicable.
• Deducting any allowable expenses and debts.
• Calculating the tax liability based on the taxable amount.

Let’s consider an example to illustrate this process:

Common Allowances and Deductions

Several allowances and deductions can reduce the inheritance tax liability. These include:

• The nil-rate band, which is currently £325,000.
• The residence nil-rate band, available when leaving a residence to direct descendants.
• Allowable expenses and debts, such as funeral costs and outstanding mortgages.

Understanding these allowances and deductions is crucial for minimizing your inheritance tax liability. We recommend consulting with a financial advisor to ensure you’re taking advantage of all available reliefs.

Consequences of Late Payment

Failing to settle inheritance tax on time can lead to severe consequences, affecting not only the estate’s finances but also the administration process.

Financial Penalties for Late Payment

When inheritance tax is not paid on schedule, HMRC imposes interest on the outstanding amount, which can significantly increase the total liability. The interest rate is determined by the HMRC, and it can vary over time. To avoid these additional costs, it’s crucial to settle the inheritance tax bill promptly or explore available payment arrangements.

Some key points to consider regarding financial penalties include:

• The interest rate on late payments is typically higher than standard bank rates.
• Interest is calculated on a daily basis, compounding the total amount owed.
• Penalties can be substantial, making it essential to address any tax liabilities as soon as possible.

Impact on Estate Administration

Late payment of inheritance tax can also delay the administration of the estate. Until the tax is paid, the estate cannot be fully distributed among the beneficiaries, potentially causing inconvenience and distress to those involved.

The administration process can be impacted in several ways:

1. Delays in settling the estate can lead to prolonged uncertainty for beneficiaries.
2. Assets may need to be sold quickly to cover the tax liability, potentially at unfavorable prices.
3. The overall cost of administering the estate may increase due to additional legal and professional fees.

To mitigate these risks, it’s advisable to seek professional guidance on managing inheritance tax payments and exploring available options for payment arrangements.

By understanding the consequences of late payment and taking proactive steps, you can ensure a smoother estate administration process and minimize potential financial penalties.

Using Life Insurance for Payment

Life insurance policies can provide a much-needed lump sum to cover inheritance tax liabilities, ensuring that your loved ones are not burdened with a large tax bill.

When planning for inheritance tax, it’s essential to consider how life insurance can play a role in managing inheritance tax payments. Certain types of life insurance policies can be written in trust, which means they are not included in the estate, thereby reducing the inheritance tax liability.

Life Insurance and Inheritance Tax

Life insurance can be a valuable tool in paying inheritance tax. Policies can be specifically designed to cover the potential inheritance tax liability, providing a lump sum upon the policyholder’s death. This can be particularly beneficial for families with significant assets.

Benefits of Life Insurance Policies

Having a life insurance policy in place can offer several benefits when it comes to spreading inheritance tax payments. Here are some key advantages:

• Provides a lump sum to pay inheritance tax, reducing the need to sell assets.
• Can be written in trust to avoid being included in the estate.
• Offers peace of mind knowing that inheritance tax is covered.

To illustrate the benefits, let’s consider the following table:

In conclusion, life insurance can be a crucial component in planning for inheritance tax, helping to manage and spread the payments effectively.

Planning for Inheritance Tax

Effective planning is crucial to minimise the impact of inheritance tax on your estate. We understand that navigating the complexities of inheritance tax can be daunting, but with the right strategies, you can protect your assets and ensure that your loved ones receive the maximum inheritance.

Importance of Early Planning

Early planning is key to reducing the inheritance tax burden. By starting early, you can explore various options and make informed decisions about your estate. We recommend considering the following:

• Making gifts to reduce the value of your estate
• Utilising trusts to manage and distribute your assets
• Taking advantage of allowances and reliefs available under UK tax law

By adopting these strategies, you can significantly reduce the inheritance tax liability, ensuring that more of your estate goes to your beneficiaries rather than being paid in tax.

Strategies to Minimise Inheritance Tax

There are several strategies you can employ to minimise inheritance tax. Making gifts is one effective method; by gifting assets to your loved ones during your lifetime, you can reduce the overall value of your estate. Additionally, utilising certain types of trusts can help manage your assets in a tax-efficient manner.

Another crucial aspect is to take full advantage of the allowances and reliefs available. For instance, the residence nil-rate band can significantly reduce the inheritance tax liability if certain conditions are met. We can help you navigate these complexities and ensure you’re making the most of the available tax savings.

It’s also worth considering the role of life insurance in your inheritance tax planning. Certain life insurance policies can provide a payout that can be used to cover inheritance tax liabilities, thereby protecting your estate.

Professional Guidance

Managing inheritance tax effectively often necessitates the help of a professional. The complexities involved in understanding and navigating the rules surrounding inheritance tax can be overwhelming, making expert advice invaluable.

When to Seek Legal or Financial Advice

It’s essential to seek professional guidance when you’re unsure about how to manage inheritance tax payments or need help with payment arrangements. Legal and financial professionals can provide tailored advice to suit your specific situation, helping you navigate the process more efficiently.

Some scenarios where seeking advice is particularly beneficial include:

• When the estate includes complex assets, such as businesses or multiple properties.
• If you’re unsure about the eligibility for instalment payments.
• When dealing with international assets or tax implications.

Choosing the Right Professional

Selecting the right legal or financial professional is crucial. You should look for individuals or firms with experience in handling inheritance tax matters. Consider their expertise, reputation, and the services they offer to ensure they can meet your needs.

Here are some tips for choosing the right professional:

• Check for relevant qualifications and certifications.
• Ask for referrals from trusted sources.
• Assess their experience with cases similar to yours.

By seeking the right professional guidance, you can ensure that you’re managing inheritance tax payments effectively and making the most of available options for payment arrangements.

Frequently Asked Questions

As we conclude our guide on paying inheritance tax in instalments, we address some common questions that may still be on your mind. Understanding the intricacies of inheritance tax payment schedules and eligibility for instalment plans can be complex, but we’re here to simplify it for you.

Common Concerns and Clarifications

Many individuals wonder if they can pay inheritance tax in installments. The answer is yes, under certain conditions. The eligibility criteria and application process are crucial in determining whether you can benefit from an instalment plan. We recommend reviewing the specific requirements and consulting with a professional to ensure you’re making the most suitable decisions for your situation.

Additional Resources for Further Guidance

For more detailed information on managing inheritance tax payments, including setting up an inheritance tax payment schedule, we suggest exploring resources from reputable sources such as the UK Government’s website or consulting with a financial advisor specializing in estate planning.

Preparing for potential inheritance tax changes in 2025?

Schedule a free consultation with our team to explore setting up a trust.

Which Assets Qualify for Instalment Payments — and Which Do Not

Not all estate assets are eligible for the instalment option. HMRC sets out specific qualifying categories, and understanding which assets fall inside or outside those boundaries can materially affect how an executor approaches cashflow planning during probate. The rules are governed by IHTM30191 in HMRC’s Inheritance Tax Manual, which our team would encourage executors to review alongside professional guidance.

Asset Types That Typically Qualify

In most cases, the following categories of asset may be eligible for payment by instalment:

• Land and buildings — including the deceased’s main residence, investment properties, and agricultural land situated in the UK.
• A business or interest in a business — such as a sole trader’s business or a share in a partnership, where the asset cannot readily be sold in parts.
• Controlling shareholdings in a company — generally where the deceased held more than 50% of the voting shares, giving control of the company.
• Unlisted shares and securities — shares in companies not listed on a recognised stock exchange may qualify, provided certain conditions around value or liquidity are met.
• Qualifying gifts — certain lifetime gifts that become chargeable on death, where the recipient still holds the asset and it falls into one of the above categories, may also attract instalment treatment.

It is worth noting that Business Property Relief or Agricultural Property Relief, where applicable, may reduce the taxable value of some of these assets before the instalment question even arises.

Asset Types That Generally Do Not Qualify

Cash, bank accounts, listed shares, unit trusts, ISAs, and most personal possessions do not qualify for instalment treatment. If an estate holds sufficient liquid assets to settle the IHT liability outright, HMRC will typically expect payment in full by the standard deadline of six months after the end of the month of death. Executors who miss this deadline face interest accruing at the current HMRC late-payment rate — currently the Bank of England base rate plus 2.5% — regardless of whether the estate is otherwise liquid.

How Each Annual Instalment Is Calculated in Practice

Where instalment treatment is approved, HMRC divides the tax attributable to the qualifying asset into 10 equal annual instalments. The first instalment falls due at the standard six-month deadline; subsequent instalments fall on each anniversary of that date. In practice, this means an executor managing a property-heavy estate could spread a significant liability over a decade — though interest will continue to accrue on the outstanding balance for most asset types. Only certain business assets and unlisted shares that meet specific conditions may attract interest-free instalment treatment. Executors should confirm the interest position with HMRC or a suitably qualified adviser before assuming no interest applies, as the distinction between interest-bearing and interest-free categories is not always straightforward. In our experience, estates that combine the instalment route with a whole-of-life policy written in trust can eliminate both the liquidity problem and the ongoing interest burden simultaneously — using the policy proceeds to settle the outstanding balance early without triggering further IHT exposure on the policy itself.

Common Questions About Inheritance Tax Payment

Can inheritance be paid in instalments?

Yes, in certain circumstances. Where an estate includes qualifying assets — most commonly land, property, a business interest, controlling shareholdings, or unlisted shares — the executor may elect to pay the IHT attributable to those assets in up to 10 equal annual instalments rather than as a single lump sum. The election must generally be made on the IHT account submitted to HMRC, and the first instalment is still due by the standard payment deadline. Not all assets qualify, and interest typically continues to run on the unpaid balance, so the instalment route is a cashflow tool rather than a cost-free deferral.

How long do you have to pay inheritance tax?

The standard deadline is six months after the end of the month in which the deceased died. For example, if a person died in March, IHT would ordinarily be due by 30 September of the same year. After that date, HMRC charges interest on any unpaid amount. Where the instalment option applies, the first payment is still due at this six-month point; it is only the subsequent nine instalments that extend the payment horizon, each falling on the anniversary of the first payment date.

What is the interest rate on tax instalments?

HMRC charges late-payment interest at the Bank of England base rate plus 2.5%. This rate applies to the outstanding IHT balance from the standard six-month deadline onwards, and it applies to instalment arrangements for most qualifying assets — including property and most shareholdings. A narrower category of assets, principally certain qualifying business assets and unlisted shares meeting specific conditions, may attract interest-free instalment treatment. Because the base rate element fluctuates, executors managing a long instalment schedule should factor in potential rate movements when planning cashflow over the full 10-year horizon.

Is there a way around paying inheritance tax?

There is no lawful mechanism to avoid a valid IHT liability entirely, and our team would caution against any arrangement that purports to do so. However, there are a number of legitimate planning tools that may reduce the overall IHT exposure of an estate over time. These include making use of the nil-rate band and residence nil-rate band, making regular gifts out of surplus income, using Business Property Relief where it genuinely applies, and placing assets such as whole-of-life policies into trust so that the proceeds fall outside the scope of IHT rather than forming part of the taxable estate. For families facing an immediate IHT liability on a property-rich estate, combining the instalment option with a trust-held policy is one approach that can address both the timing and the cost of the obligation. Any planning of this kind should be reviewed by a suitably qualified professional to ensure it reflects your specific circumstances and remains compliant with current HMRC guidance.