You can pay Inheritance Tax in instalments if you owe tax on illiquid assets like property, business interests or some shares. HMRC will let you spread the bill over 10 years, but you will be charged interest, and the remaining balance has to be paid immediately if the asset is sold.

When someone passes away, the last thing you want to deal with is the financial stress of a big tax bill. But for many families, especially if part of the inheritance is tied up in property or business assets, paying Inheritance Tax (IHT) in one lump sum feels unrealistic.

The problem is that probate can only be granted once Inheritance Tax has been paid. The good news? HMRC will let many estates pay Inheritance Tax in instalments over ten years, giving families breathing room at a difficult time and helping them kick off the probate process. But while the instalment option can feel helpful, the rules are a little complicated, and interest can quickly add up.

Here, we explain how instalment payments work, which assets qualify, how interest is charged, and what options exist if the estate simply can’t afford to wait.

Can you pay Inheritance Tax in instalments?

Yes. HMRC will let you pay Inheritance Tax in 10 equal annual instalments when the tax is owed on assets that may take longer to sell. Normally, Inheritance Tax needs to be paid within 6 months of a person’s death. However, if the estate includes one of the following assets, then HMRC may have slightly more lenient rules. These include:

• A home or other property
• Business or partnership interests
• Controlling shares (more than 50% ownership)
• Some unlisted shares worth £20,000+
• Certain agricultural land

This is designed so that families don’t have to panic sell assets at a bad time or for a reduced price to hit the deadline. 

However, paying Inheritance Tax in instalments has to be requested; it isn’t just automatically granted. It’s up to the executor to request this when completing the Inheritance Tax return.

How the Inheritance Tax instalment plan works

If you choose instalments, then the tax bill is split into 10 equal payments.

The first instalment is due by the end of the sixth month after the month of death, and the next 9 instalments are due on that same date every year.

You can pay the rest of the balance at any time; however, if the assets are sold, then the remaining balance needs to be paid back immediately. 

Which assets qualify for Inheritance Tax instalments?

Instalments are only allowed on certain assets, usually those that can’t be easily turned into cash:

Those that qualify include:

• Houses or land
• Business interests (a financial stake in a company)
• Controlling shareholdings (50% stake or more)
• Unlisted shares (£20k+)

Those that do not qualify include:

• Bank accounts
• ISAs and investments
• Personal belongings
• Cash savings

If the estate includes cash or investments that don’t qualify, the tax on those assets has to be paid in full before probate is granted. 

Does HMRC charge interest on unpaid Inheritance Tax?

Yes, HMRC will charge you interest on any unpaid Inheritance Tax. While instalments can help with cash flow, there is a catch: interest is charged on the outstanding balance from the day after the first instalment is due.

From there, interest applies to the whole unpaid balance, not just the next instalment. 

Importantly,  HMRC’s interest rate changes periodically as it is linked to the Bank of England (BoE) base rate. That means over 10 years, the interest rate charged can change a couple of times a year.

However, some assets that qualify for Business Property Relief or Agricultural Property Relief may be liable for interest-free instalments. It’s always worth checking with a professional to find out.

So, whilst breaking up the payments might sound appealing, the growing interest is the number one reason some executors choose to pay the tax off earlier, especially if the estate might take years to sell.

What happens if the asset is sold?

If a house, business or shares being taxed by instalments are sold before the 10 years is up, the unpaid Inheritance Tax becomes immediately due in full.

This rule catches many families by surprise. A beneficiary might plan to keep the property but change their mind later, and suddenly a big tax bill is due all at once.

How to apply for Inheritance Tax instalments

If an executor decides they want to apply to pay Inheritance Tax in instalments, they must:

• Complete the IHT400 form
• Note on the form that instalments are being requested
• Complete the supplementary instalment schedule on the form
• Get a payment reference number from HMRC before paying

It’s worth noting that HMRC won’t issue a Grant of Probate until the portion of IHT due on the non-qualifying assets is paid in full.

The pros (and cons) of paying in instalments

Why instalments can help:

• Avoids forced property or business sales
• Prevents assets being sold for less than they’re worth
• Gives executors more time to settle the estate

Why they’re not always ideal

• Interest can increase the final bill substantially
• 10 years is a long time to manage payments
• Full tax becomes due if the asset is sold
• Executors are personally responsible if payments are missed

For many estates, instalments are a temporary plan, but aren’t always the most cost-effective, or time-effective option. 

Alternatives to paying IHT in instalments

If the estate doesn’t have the money to settle the tax bill immediately, there are other options:

1. Use estate funds

Some banks will release money from the deceased’s bank account directly to HMRC through the Direct Payment Scheme to pay Inheritance Tax. 

2. Sell assets

This can work well, but it takes time and means you may not get the best price for the asset. Because of this, many families choose to avoid this option.

3. Estate advances 

Estate Advances or Probate Loans are a type of loan that allows executors to borrow up to 50% of the estate’s value within days, meaning they can pay off the Inheritance Tax either in part or in full immediately. 

With Provira, these loans are: 

• Fast to arrange, usually in just a few days.
• Come with no collateral or personal guarantees.
• Flexible, meaning you’re never penalised if a sale is delayed.
• Open and transparent, charging a set amount of simple interest (not compound interest like our competitors), so you’re never left guessing what the next charge is.
• Compassionate and trustworthy, with a dedicated underwriter with you every step of the way and more 5-star reviews than any other option on the market. 

With an Estate Advance with Provira, instead of waiting years or risking interest growing out of control, you can settle the Inheritance Tax bill instantly, without selling assets first.

Get in touch with Provira to find out how our Estate Advance can help you.

Paying Inheritance Tax in instalments

Dealing with Inheritance Tax can be incredibly stressful, especially when the money in the estate is tied up in property or business assets. The instalment option from HMRC is helpful, but it’s not always the cheapest or most practical option long-term.

Executors and families shouldn’t have to choose between paying HMRC or selling their family’s assets fast.

If you need to pay Inheritance Tax but don’t have access to the funds yet, Provira’s Estate Advance will help you release money from the estate and get the probate process moving. 

We offer loan options that can help you pay the full IHT amount or just the first instalment, without selling assets or putting your own finances on the line.

Get in touch with our kind and compassionate team today to find out if our Estate Advance is right for you.