When Is Inheritance Tax Payable?

Dealing with the loss of a loved one can be an emotional and challenging time. Alongside the practical arrangements, those responsible for managing an estate may also need to deal with legal and financial responsibilities, including Inheritance Tax (IHT).

One of the most common questions executors and family members ask is: when does Inheritance Tax need to be paid?

The short answer is that Inheritance Tax is usually dealt with early in the probate process and is often payable before the Grant of Probate is issued.

When does Inheritance Tax need to be paid?

Inheritance Tax is generally due within six months from the end of the month in which the person died.

For example, if someone dies on 10 January, the usual deadline for paying Inheritance Tax would be 31 July.

However, in many cases, IHT needs to be addressed sooner because the estate may need to provide evidence that tax has been dealt with before probate can progress.

Why does Inheritance Tax need to be paid before probate?

Before an executor or administrator can collect and distribute most assets in an estate, they usually need to apply for a Grant of Probate or Letters of Administration.

HMRC requires Inheritance Tax to be paid, or appropriate arrangements to have been made, before the probate application can be completed.

This helps to ensure that any tax owed is settled before the estate assets are passed on to beneficiaries.

What happens if the estate includes property?

Many estates include property, which can sometimes make paying Inheritance Tax more complicated.

A property may represent a significant part of an estate’s value, but it cannot always be sold quickly to raise funds.

In some circumstances, Inheritance Tax on certain assets, including property, can be paid by instalments. This can help executors manage cash flow while the estate administration process continues.

What if there is not enough money available to pay Inheritance Tax?

It is not unusual for an estate to have valuable assets but limited cash available.

For example, an estate may include a house, but the money needed to pay the tax may not be immediately accessible.

Possible options may include:

• using funds held in the deceased’s bank accounts (some banks may release funds directly to help pay Inheritance Tax)
• arranging payment by instalments where available
• considering short-term funding options

Executors should seek professional guidance if they are unsure how to meet an IHT liability without delaying the administration of the estate.

Who is responsible for paying Inheritance Tax?

The executor named in the Will, or the administrator where someone dies without a Will, is responsible for managing the estate administration process.

This includes:

• valuing the estate
• calculating any Inheritance Tax due
• completing the required HMRC forms
• ensuring any tax owed is paid

Executors have important legal responsibilities, so it is essential that tax matters are handled carefully and accurately.

What happens if Inheritance Tax is paid late?

If Inheritance Tax is not paid by the required deadline, HMRC may charge interest on the outstanding amount.

In some circumstances, penalties may also apply.

Keeping on top of deadlines can help prevent unnecessary costs and delays during what is already a difficult time.

How Attwells Solicitors can help with Inheritance Tax and estate administration

Managing an estate can feel overwhelming, particularly when tax requirements, probate applications and legal responsibilities all need to be dealt with at the same time.

At Attwells Solicitors, our experienced team can guide you through the estate administration process, helping you understand your responsibilities and ensuring the necessary steps are completed correctly.

We can assist with:

• understanding Inheritance Tax requirements
• preparing and submitting probate paperwork
• dealing with estate administration matters
• supporting executors through the legal process

If you are dealing with an estate and are unsure about Inheritance Tax or probate, our team is here to help.

Contact Attwells Solicitors today for practical, compassionate advice on estate administration and Inheritance Tax.