Can I Postpone Payment of Inheritance Tax?

When someone dies and their estate owes Inheritance Tax, you normally need to pay this tax before you can obtain probate (the legal right to deal with their estate). However, if you cannot access the deceased's assets without probate, you may be able to postpone payment by applying for what's known as a 'grant on credit'. This allows you to delay some or all of the Inheritance Tax payment until after probate has been granted, though you'll still need to pay the outstanding amount as soon as possible afterwards.

The Standard Payment Deadline

Inheritance Tax must be paid by the end of the sixth month after the person died. For example, if the person died in January, you must pay the tax by 31 July. If you don't pay by this deadline, HMRC will charge interest on the unpaid amount.

Ways to Pay Before Applying for Postponement

Before HMRC will consider postponing payment, you must demonstrate that you've explored all available options to release funds from the deceased's estate. Several types of assets can be used to pay Inheritance Tax directly to HMRC before probate is granted:

Bank and building society accounts or National Savings and Investments (NS&I)

You can transfer money from the deceased's accounts directly to HMRC using the Inheritance Tax Direct Payment Scheme. This allows banks and building societies to release funds specifically for paying Inheritance Tax without requiring probate first.

British government stock

If the deceased held British government stock, this can be used to pay the Inheritance Tax.

Share and investment portfolios

Cash funds held within a share or investment portfolio can sometimes be released directly to HMRC. Contact the stockbroker or fund manager to find out whether they can do this for the estate you're administering.

Insurance and investment bonds

Some insurance and investment bond providers will release funds directly to HMRC to pay Inheritance Tax. Contact the company holding the policy to check if this option is available.

When You Can Apply for Postponement

You can apply for a grant on credit only if you genuinely cannot access the assets in the deceased's estate before probate has been granted. This is a legitimate problem when, for example, the estate consists mainly of property or assets that cannot be accessed or sold without probate.

Once HMRC agrees to postpone the payment and issues the grant of probate, you'll be expected to pay the outstanding tax as soon as possible. This is not a long-term payment plan – it's a temporary arrangement to break the catch-22 situation where you need probate to access assets but need to pay tax before getting probate.

What Happens to Property in the Estate

If HMRC agrees to postpone payment, they may place a 'notice of the Inheritance Tax charge' against any land or buildings in the estate at the Land Registry. This is an entry against the registered title of the property that protects HMRC's interest. It doesn't prevent you from selling the property, but potential buyers may ask for the notice to be removed before completing the purchase.

How to Apply for Postponement

To apply for a grant on credit, you need to take the following steps:

Submit the Inheritance Tax account

Send HMRC a signed and completed Inheritance Tax account form IHT400, along with any supplementary pages or supporting documents. If you're in Northern Ireland, include Probate Summary form IHT421. If you're in Scotland, include Confirmation form C1.

Write a letter to HMRC

Your letter must include:

• The words 'Grants on credit' and your Inheritance Tax reference number at the top
• A statement confirming that you're unable to release funds from the estate using any of the methods described above
• The maximum amount you can pay towards the Inheritance Tax before the grant is issued
• What steps you'll take to raise the funds to pay the tax if HMRC agrees to the postponement, using the quickest option available

Send everything to:

HM Revenue and Customs

Inheritance Tax Team

BX9 1HT

If HMRC Agrees to Postpone

HMRC will consider each case on its own merits. Even if they agree to postpone payment, you're still expected to pay as much of the Inheritance Tax as you can upfront.

If your application is approved, HMRC will ask you to sign an undertaking. This is a legally binding promise to pay the Inheritance Tax within an agreed timescale.

If the tax will be paid following the sale of a property, there must be an accepted offer on the property and an estimated date for exchange of contracts. HMRC cannot issue an open-ended undertaking without a clear date when the tax will be paid.

Interest on Late Payment

HMRC will charge interest if you don't pay all of the Inheritance Tax by the original due date (the end of the sixth month after death). This interest applies even if HMRC agrees to postpone the payment – the interest clock starts ticking from the original deadline, not from when you eventually pay.

Sources

• Apply to postpone payment of Inheritance Tax

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.