• An estate can be worth enough on paper to cover its Inheritance Tax bill but still not have enough accessible cash if most of its value is tied up in property, investments or other assets.
• If there isn’t enough cash available, executors have several options, including using funds from the deceased’s bank account, paying in instalments, applying for a grant on credit or using an Estate Advance.
• Provira’s Estate Advance is designed to help executors pay IHT until funds from the estate become available.

If an estate can’t afford to pay Inheritance Tax because there isn’t enough accessible cash, there are a number of options available. You may be able to use money from the deceased’s bank accounts, pay from your own funds and reclaim it later, pay the tax in instalments, ask HMRC to postpone payment or use an Estate Advance.

It’s a situation that catches a lot of executors out. An estate can be worth hundreds of thousands of pounds on paper, but that doesn’t necessarily mean there is enough money sitting in the bank to pay an Inheritance Tax (IHT) bill.

You might, for example, be dealing with an estate worth £800,000 where most of that value is tied up in a house. The money is there in theory, but you can’t necessarily access it when HMRC needs to be paid.

Inheritance Tax is generally due by the end of the sixth month after the person dies, so for many executors, this can be a huge hurdle to overcome. The good news is that there are options.

At Provira, we help executors facing exactly this problem. OurEstate Advance gives you access to up to 50% of the net value of an estate within days, helping you pay Inheritance Tax and other urgent estate expenses without having to fund them personally.

To apply, speak to the team today.

What happens if there isn’t enough money in the estate to pay Inheritance Tax?

There are a few different ways to pay Inheritance Tax when the estate doesn’t have enough cash to pay it. Which one makes sense will depend on where the value in the estate sits, how much IHT is due and how quickly you need to pay.

Here are the main options.

1. Pay Inheritance Tax from the deceased’s bank account

Before looking anywhere else for money, check whether cash held in the deceased’s bank account can be used.

HMRC operates a Direct Payment Scheme that allows a number of banks, building societies and investment companies to send money from the deceased’s accounts directly to HMRC. Importantly, this can be done before probate has been granted.

If there is enough money in the account, this can be one of the easiest ways to settle some or all of the bill.

We’ve explained the different ways of making a payment in our guide tohow and when to pay Inheritance Tax.

2. Pay the Inheritance Tax yourself and reclaim it later

Executors can also use their own money to pay Inheritance Tax. Once probate has been granted and money becomes available from the estate, they can then reclaim what they’ve paid.

For a smaller bill, this might be manageable. But an executor shouldn’t feel that being named in a will automatically means they are expected to find £50,000, £100,000 or more from their own savings to pay an Inheritance Tax bill.

Even if you do have the money available, tying it up whilst the estate is being administered may not be something you’re comfortable doing.

This is one of the reasons specialistExecutor Loans like those offered by Provira exist.

3. Pay Inheritance Tax in instalments

Depending on the assets involved, HMRC may let you spread the Inheritance Tax bill over ten annual instalments rather than paying it all at once.

They sometimes approve this when an estate is made up mostly of assets that take longer to sell like land, property and shares. However, even after the first instalment is made, interest is charged on the remaining amount, which can compound quickly on bigger estates. 

We’ve covered the rules in much more detail in our guide around paying Inheritance Tax in instalments.

4. Ask HMRC to postpone the payment

If you genuinely can’t release enough money from the estate to pay the tax, you may be able to ask HMRC for what’s known as a grant on credit.

This allows HMRC, in certain circumstances, to postpone some or all of the IHT payment so that probate can be granted. However, this isn’t something you should assume HMRC will automatically agree to. In fact, a grant on credit can be very hard to secure.

Additionally, interest will still be charged on any outstanding amount after the deadline.

5. Borrow against the estate

If there is enough value in the estate to pay the tax but not enough cash available now, another option is estate finance.

Unlike taking out a personal loan, an Estate Advance is designed to allow executors to borrow against the net value of the estate.

Provira’sEstate Advance gives executors access to up to 50% of the estate’s net value. The money can be used to pay Inheritance Tax and avoid any nasty interest or HMRC admin.

You can read more about this option in our guide:Can an executor borrow money to pay Inheritance Tax?

Why might an estate not have enough cash to pay Inheritance Tax?

An estate may be valuable enough to owe Inheritance Tax while still having very little cash available to actually make the payment.

This happens when:

• Most of the estate’s value is held in property
• There isn’t enough money in the deceased’s bank accounts
• Money is tied up in investments or shares
• The estate contains business assets
• Assets are taking longer than expected to sell
• The estate has other debts and expenses that also need paying

For executors, it’s important to look at both the total value of the estate and how much of that value you can actually access to work out whether paying Inheritance Tax is likely to become a problem.

What happens if Inheritance Tax isn’t paid within six months?

If Inheritance Tax isn’t paid by the end of the sixth month after the person died, HMRC will normally start charging interest on the unpaid amount.

This doesn’t mean executors should panic as soon as they realise the estate doesn’t have enough cash. But it does mean that ignoring the problem and waiting for assets to become available can make the eventual bill more expensive.

If you’re approaching the deadline and know the estate won’t have enough accessible cash to pay Inheritance Tax, it’s worth exploring your options sooner rather than later.

How can Provira help if an estate doesn’t have enough cash to pay Inheritance Tax?

At Provira, this is one of the main reasons executors come to us.

You know there’s enough value in the estate, you know the Inheritance Tax can eventually be paid, the problem is that you can’t access the money when you need it.

Our Estate Advance is designed to help bridge that gap.

With a Provira Estate Advance, you can:

• Access up to 50% of the net value of the estate
• Use the funds to pay some or all of an Inheritance Tax bill
• Have the application assessed against the estate rather than your personal credit history
• Avoid personal guarantees or charges over your own property
• Make no monthly repayments
• Repay early without an early repayment fee
• Pay simple rather than compound interest

We also work directly with solicitors and can make Inheritance Tax payments directly to HMRC.

The Advance is normally repaid once the estate’s assets are sold, so you aren’t taking on a monthly personal repayment while you’re trying to administer the estate.

You canfind out more about our Estate Advance here.