Losing a loved one is hard enough without HMRC adding to the pressure. Yet many UK families are unaware that Inheritance Tax (IHT) generally has to be paid within just six months of the end of the month of death, or interest starts accumulating. Considering the average UK property still takes weeks or even months to sell, this creates real challenges for executors.

What is the six-month rule?

Inheritance tax is normally due by the end of the sixth month after the person's death. So, for someone who died on 10 April, IHT would generally be due by 31 October.

After that date, HMRC charges interest on any unpaid IHT at its prescribed rate, which is updated periodically.

Why can the deadline be a problem?

Many estates are tied up in property or investments that take time to sell or release. Executors may need to pay IHT before they can even access the bank accounts or savings of the deceased.

Banks may agree to release funds directly to HMRC under the 'direct payment scheme', but it is not always straightforward.

How can executors get the cash to pay IHT?

Common approaches include using the deceased's bank accounts under the direct payment scheme, taking out an executor's Loan from a specialist lender, or borrowing against Assets within the estate.

Insurance policies written in trust can also provide useful Liquidity to pay tax bills quickly.

Can you pay in instalments?

For certain assets, such as property or some shares, IHT can be paid in instalments over up to 10 years. However, interest still applies on the outstanding balance.

How is IHT calculated?

IHT is calculated based on the value of the estate at the date of death, less any allowable nil-rate bands, residence nil-rate bands, exemptions and reliefs.

The standard rate is 40% on amounts over the available thresholds, reducing to 36% if at least 10% of the estate is left to charity.

What happens if you miss the deadline?

Interest accumulates daily on any unpaid IHT after six months. HMRC can also impose penalties for late submissions of the IHT return (IHT400). In severe cases, this can add hundreds or thousands of pounds to the bill.

Communicating early with HMRC about Cash Flow difficulties is generally better than ignoring deadlines.

What does the probate process look like?

Executors typically need to submit an IHT return and may also need to apply for probate to manage the estate. The two processes are linked: probate often cannot be granted until IHT is paid or arrangements are in place.

How will the 2027 pension changes affect this?

From April 2027, pensions are expected to fall within the IHT net. This could mean larger IHT bills, more reporting, and possible delays in releasing pension money to beneficiaries while HMRC and providers coordinate.

Planning ahead, including ensuring liquidity to pay any future IHT, is becoming even more important.

Why this matters now

With more estates being dragged into IHT and pension Wealth soon entering the net, families could face larger and more complex tax bills with the same tight six-month window. Knowing the rules in advance can prevent painful surprises during an already difficult time.

Key Takeaways

  • Inheritance tax is typically due within six months of the end of the month of death.
  • Interest applies on amounts unpaid after the deadline.
  • Instalment Options are available for certain assets, with ongoing interest.
  • Executors may use direct payment schemes or specialist loans to fund the bill.
  • Future pension changes may increase complexity and IHT exposure.

 

 

Preparing executors in advance

Although IHT must usually be paid within six months of death, much of the preparation can be done in advance. Executors who know where to find key documents and contacts can move much more quickly.

A simple 'estate file' kept securely, listing pensions, ISAs, savings, debts and key advisers, can dramatically reduce delays.

Common misconceptions to avoid

'I have a year to settle the estate.' IHT is generally due within six months of the end of the month of death.

'Instalments mean I escape interest.' Interest still applies on outstanding amounts.

'Banks always release funds quickly.' Each provider has its own process.

A final word

Taking a measured, well-informed approach is one of the most important parts of any UK retirement plan. Regularly reviewing pensions, ISAs and other savings, alongside major life changes, helps ensure that your long-term goals stay on track. Working with a regulated financial adviser, and consulting trusted resources such as MoneyHelper and Pension Wise, can make complex decisions easier to navigate.