Can You Pay Inheritance Tax in Instalments?

If you’re the executor of somebody’s estate, you may find that you can’t pay its full inheritance tax bill straight away. With this in mind, Prestige Tax and Trust Services asks; can you pay inheritance tax in instalments?

Payment options

An estate may be liable to pay inheritance tax to the government if it’s worth more than £325,000 at the point of the deceased’s passing. If you’re the executor of said estate, it’s your job to work out its inheritance tax obligations, and then pay it. But what if there are unforeseen circumstances which prevent you from paying the bill all at once?

The government allows you to pay inheritance tax in yearly instalments. However, you can only do so on assets, such as a house, that may take time to sell. You must pay inheritance tax in equal annual instalments over 10 years, and pay the tax in full once the asset in question has been sold.

Paying in instalments

If you wish to pay in yearly instalments, say so when you fill out the IHT 400 form while you’re applying for probate. The first instalment will be due six months after the deceased has passed away (if they died on 12th February, for example, you’d have to pay by 31st August). You must then pay your inheritance tax instalments on this date every year, until the payment is cleared.

When you choose to pay off an estates inheritance tax in instalments, you’ll usually pay interest– use this calculator to work out how much. Unless you pay late, you won’t pay interest on the first instalment. However you will have to pay interest on the estate’s full outstanding inheritance tax balance on each additional instalment. Furthermore, if you pay late, you’ll be required to pay interest on the instalment itself, from its due date to the date of payment.

We should also note that you can pay off the estate’s complete inheritance tax balance, along with any interest due, at any time. All you need to do is write to HM Revenue and Customs Trust and Estates department, requesting for a final assessment of how much the estate owes in inheritance tax and interest – but you don’t have to include payment.

Prestige Tax and Trust Services

If you’re appointed as the executor of the estate of someone who’s passed away, you may need to consult legal experts when dealing with its inheritance tax obligations. Prestige Tax and Trust Services is here to help; our legal time has the experience and knowledge to ensure that the estate in question pays the correct amount of inheritance tax.

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