Month Seven: What HMRC Does When the IHT Isn't Paid

If you have missed the six-month inheritance tax deadline, the first thing to understand is that nothing dramatic happens overnight — but from the first day of month seven, HMRC starts charging interest on the unpaid tax, and it keeps charging it every day until the bill is settled. The deadline does not move because probate has not come through, because the valuations are not finished, or because the estate's money is still locked in a frozen account. It is a fixed statutory date, and interest is the price of passing it.

This is one of the cruellest corners of administering an estate, because the reason people miss it is usually not carelessness. Inheritance tax is due before you can get the grant that releases the money to pay it. Families are asked to find a large sum from an estate they cannot yet touch, and when they cannot, the clock simply starts running.

So the useful question is not "are we in trouble" — you are not being punished, you are being charged interest — but "how do we stop it growing". This page explains exactly when the deadline falls, what interest HMRC adds and how, and the concrete moves still open to an executor while the grant is outstanding.

The short answer: interest starts, the deadline does not move

Inheritance tax on most of an estate must be paid by the end of the sixth month after the month in which the person died. Miss that, and HMRC charges interest on whatever is still owed, running from the day after the deadline until the day the tax is paid. The interest is automatic and it is calculated day by day, so every week of delay adds a little more.

What trips people up is the assumption that the deadline flexes to fit the process. It does not. The grant of probate can take months; the deadline does not wait for it. A house can be slow to value or slow to sell; the deadline does not wait for that either. The estate's cash can be frozen in the deceased's accounts; the deadline is entirely indifferent. The tax is simply due, and interest accrues on the shortfall regardless of the reason for it.

The government sets out both the deadline and the interest treatment in its guidance, and the rate is published and updated there.

Source: HM Revenue & Customs, Pay your Inheritance Tax bill and Interest rates for late and early payments, published on gov.uk under the Open Government Licence v3.0.

When the deadline actually falls

The rule counts from the month of death, not the exact date. The tax is due by the end of the sixth month after the month someone died. It is easiest to see with a date.

If the death was in January, you count February, March, April, May, June, July — and the tax is due by the end of July. From the first of August, interest runs. If the death was in June, the tax is due by the end of December, and interest runs from the first of January. Work out that date early and write it down, because it is the single most important date in the whole process and it is quietly fixed from the day of death.

There is one important exception to the single-payment rule. Tax on certain assets — land and buildings, and some businesses and shares — can be paid in instalments spread over up to ten years rather than all at once by the six-month date. That option is dealt with below, but it is worth knowing from the outset that the family home does not necessarily have to be paid for in one lump on the deadline.

What the first day of month seven triggers

On the day after the deadline, the outstanding tax begins to carry interest at HMRC's published late-payment rate. That rate is not a flat figure fixed forever; it is set in law as a margin above the Bank of England base rate, and from 6 April 2025 that margin was increased to four percentage points above the base rate. Because it tracks the base rate, the headline percentage moves over time, and HMRC publishes the current figure on gov.uk.

Source: HM Revenue & Customs, Interest rates for late and early payments, gov.uk, Open Government Licence v3.0. The late-payment margin was increased to four percentage points above the Bank of England base rate from 6 April 2025.

The important point for a worried executor is that interest is charged on what is outstanding, day by day. Pay half the tax and the interest only runs on the remaining half. Pay a large chunk early and you cut the running total, even if you cannot yet pay all of it. This is why partial payment matters so much: there is no all-or-nothing rule, and every pound paid sooner is a pound not carrying interest.

It also means the size of the underlying bill is what really drives the pain. Where an estate is well above the allowances — for instance where an unused pension is being pulled into the taxable estate, which we cover in how an unused pension pot is heading into the taxable estate, or where a relief only cuts the bill by half rather than removing it, as in why fifty per cent relief above the allowance still leaves a real bill — the interest on a delayed payment can itself become a meaningful sum.

Why it happens so often: the money is behind the grant

The reason so many estates miss the deadline is structural, not personal. For an estate that owes inheritance tax, you generally have to pay the tax before HMRC will process the account and before the probate registry will issue the grant. But until the grant is issued, the banks will not release the deceased's money. The tax stands between the family and the very funds meant to pay it.

Sometimes there is cash to hand — a surviving spouse's own savings, or money already outside the estate. Often there is not, and the estate is asset-rich and cash-poor: a house worth a great deal and a current account that will not open. That is precisely the gap that leaves people staring at a deadline they have no lawful way to meet on time.

It is worth being clear that a delayed grant does not only cost interest. The application itself carries an upfront fee that has to be found from somewhere, as we set out in the probate application fee nobody budgets for, and applications are frequently held up by errors that could have been avoided, which we cover in why the probate registry stopped your application. Every one of those delays extends the period over which interest runs.

What you can still do right now

Even with the grant outstanding, an executor is not powerless. There are three practical routes, and they can be combined.

Use the Direct Payment Scheme. Banks, building societies and National Savings and Investments can pay inheritance tax directly to HMRC out of the deceased's own accounts, before the grant is issued, using form IHT423. This is designed for exactly this situation. You send the form to each institution holding money, and it transfers the funds straight to HMRC rather than to you. It will not always cover the whole bill, but it can cover a large part of it from money that is otherwise frozen.

Elect to pay by instalments. For qualifying assets — chiefly land and buildings, and some businesses and unquoted shares — you can choose to pay the tax in up to ten annual instalments rather than in one payment on the deadline. This can dramatically reduce what has to be found immediately. Interest is generally charged on the amounts still outstanding, so it is not free money, but it turns an impossible lump sum into a manageable schedule and can be the difference between coping and not.

Make a payment on account. If you do not yet know the exact figure because a valuation is unfinished, you do not have to wait for certainty before paying anything. You can pay an estimated amount on account. If you overpay, HMRC refunds the excess with interest; if you underpay, interest only runs on the shortfall. Either way, paying your best estimate early stops interest building on money you were always going to owe.

Where a life policy was written in trust, the trustees can usually claim on the death certificate alone, well before any grant, and those proceeds can be used to settle the tax while the frozen estate catches up. That is one of the quiet reasons cover is arranged in trust in the first place. If there is no such cover in the family and you want to understand what it would take to put it in place for the future, you can get life insurance quotes and have an FCA-authorised broker explain how a policy held in trust can be arranged to meet a future bill.

Interest is not a penalty — and the separate filing trap

It helps to keep two different HMRC timetables apart, because families often blur them and frighten themselves unnecessarily.

The first is paying the tax, which is due at six months and attracts interest, not a penalty, if it is late. Interest simply reflects that the Exchequer was kept out of its money; it is not a fine, it is generally not appealable, and there is no "reasonable excuse" that switches it off. That is why the strategy is always to pay early rather than to argue.

The second is filing the inheritance tax account, which is a separate deadline — generally within twelve months of the end of the month of death — and it is late filing, not late payment, that can bring actual penalties. Those penalties escalate the longer the account is outstanding. So it is entirely possible to have paid interest for being a little late with the money while still being inside the window for the paperwork, and it is equally possible to make the opposite mistake. Diarise both dates.

Not everything an estate spends is deductible against the tax, either, and assuming it is can leave a shortfall that then carries interest. HMRC allows reasonable funeral costs but draws lines around the extras, which we explain in whether HMRC will allow the wake and the headstone. Getting the deductions right the first time avoids a later correction that reopens the interest question.

Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the six-month payment deadline and the interest that follows it are identical in England, Wales, Scotland and Northern Ireland. There is no separate Scottish or Northern Irish inheritance tax timetable, and the Direct Payment Scheme, instalments and payments on account all work the same way wherever the person lived.

What differs is the document you are waiting for. In Scotland the grant is called confirmation and is obtained through the sheriff court rather than the probate registry, and Scottish succession law gives a surviving spouse and children fixed entitlements that can shape who inherits and how quickly, as we set out in what a surviving spouse in Scotland receives under prior rights. Those differences change the route to releasing the estate's money; they do not change the date the tax is due or the interest that runs if it is not paid.

None of this is a personal recommendation. If the sums are large or the estate is complicated, it is worth taking advice from a solicitor or a chartered tax adviser early, precisely because the cheapest thing you can do about late-payment interest is stop it as soon as possible.

Frequently asked questions

When is inheritance tax actually due?

By the end of the sixth month after the month in which the person died. That is a statutory deadline and it does not shift because probate has not been granted, because the valuations are unfinished, or because the estate's money is still frozen in a bank account. Work out the exact date from the month of death and treat it as fixed.

What happens on the first day of month seven?

Interest starts running on the unpaid tax at HMRC's published late-payment rate and continues daily until the bill is settled. Interest is not a penalty and generally cannot be appealed, so there is no reasonable excuse that switches it off. The only way to reduce it is to pay as much as you can as early as you can, because interest only runs on what is still outstanding.

What can an executor do if the grant is still outstanding?

Pay what you can through the Direct Payment Scheme using form IHT423, which lets banks and NS&I pay HMRC directly from the deceased's frozen accounts; elect to pay by instalments on qualifying land or business assets; or make a payment on account of the estimated tax. Any partial payment reduces the interest even where the final figures are not yet agreed.