Paying inheritance tax before probate is one of the biggest practical headaches executors face. HMRC needs the tax paid before the Probate Registry will issue the grant — but until the grant is issued, you can’t access the deceased’s bank accounts to pay it. This is the so-called “probate paradox”.
The good news is there are well-established ways to solve it. This guide walks through each option step by step, with practical advice on which works best for different situations.
Plain-English guide written by Simon Jenkins — covering every stage of the probate process.
The 5 main ways to pay inheritance tax before probate
- Direct Payment Scheme (DPS) using form IHT423
- Cashing in National Savings or government gilts
- Executor loan from a specialist lender
- Beneficiary contributions reimbursed later
- The instalment option for property and business assets
Option 1: The Direct Payment Scheme (IHT423)
This is the most common and usually the simplest method. The deceased’s bank or building society pays inheritance tax directly to HMRC from the deceased’s accounts, before probate is granted.
How to use the Direct Payment Scheme
- Complete form IHT400 and supporting schedules to work out the IHT due
- Complete a separate IHT423 for each bank or building society you want to release funds
- Send the IHT423 directly to the bank — not to HMRC
- The bank verifies the form and sends the requested amount directly to HMRC
- Submit the IHT400 to HMRC, along with confirmation of payment
- HMRC issues an IHT421, which you then send to the Probate Registry with your probate application
Banks that participate in the Direct Payment Scheme
Nearly all major UK banks participate, including Barclays, Lloyds, NatWest, HSBC, Santander, Nationwide, Halifax, Bank of Scotland, TSB, Royal Bank of Scotland, and Yorkshire Building Society. Smaller institutions and online-only banks sometimes do not — check first.
How long does the Direct Payment Scheme take?
Most banks process IHT423 forms within 2 to 4 weeks. Submit them as early as possible — the deadline for paying inheritance tax is six months from the end of the month of death, after which HMRC charges interest.
Option 2: National Savings and gilts
If the deceased held National Savings products (premium bonds, savings certificates, income bonds, ISAs) or UK government gilts, these can be cashed in and the proceeds paid directly to HMRC before probate.
The process is similar to the Direct Payment Scheme. Complete form IHT423, send it to NS&I or the relevant gilts registrar, and they will pay HMRC directly. This is particularly useful for estates with significant National Savings holdings.
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Option 3: Executor loans
Specialist lenders offer short-term loans to executors specifically to cover inheritance tax. The loan is secured against the estate and repaid once probate is granted and assets are realised.
How executor loans work
- The lender assesses the estate’s value and the expected probate timeline
- The loan amount typically covers the IHT bill plus a small buffer
- Interest rates are usually higher than HMRC’s — typically 6% to 9% annually
- The loan is repaid from the estate, not by the executors personally
- Executors are not personally liable provided they act reasonably
When an executor loan makes sense
Executor loans are best used when the Direct Payment Scheme is not available — for example, when the deceased held assets only with non-participating banks, when accounts are with foreign institutions, or when the bank is taking too long to process the IHT423.
Option 4: Beneficiary contributions
If beneficiaries have cash available, they can pay the inheritance tax up front and be reimbursed from the estate after probate is granted. This is interest-free for the estate and quick to arrange.
The arrangement should be documented in writing so there’s no dispute later. Beneficiaries should also understand that if the estate turns out to be insolvent or smaller than expected, they may not be fully reimbursed.
Option 5: The instalment option
For certain assets — mainly property, business assets, and controlling shareholdings — you can pay inheritance tax in 10 equal annual instalments instead of all at once. Only the first instalment is due before probate.
Which assets qualify for instalments?
- Land and buildings
- Controlling shareholdings in any company
- Unquoted shares (in certain circumstances)
- Business assets
- Timber and woodland
The cost of the instalment option
HMRC charges interest on outstanding instalments. For non-business assets, interest runs throughout the 10-year period. For business assets and certain shareholdings, no interest is charged provided instalments are paid on time. The instalments can be paid off early at any time.
Worked example: Combining methods
Consider an estate worth £800,000 made up of a £500,000 house and £300,000 in bank accounts. Inheritance tax due on the net estate above the nil rate band is approximately £190,000.
- IHT on the property portion (around £119,000) can be paid in 10 instalments — first year £11,900
- IHT on the cash portion (around £71,000) must be paid up front, but can come from the deceased’s bank accounts via IHT423
- Total cash needed before probate: approximately £83,000 (£71,000 plus first property instalment)
The Direct Payment Scheme releases £83,000 from the deceased’s bank accounts to HMRC. Probate is granted. The remaining property instalments are paid annually from sale proceeds or rental income.
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📊 Get Fee EstimateWhat if you miss the IHT deadline?
If inheritance tax isn’t paid within six months of the end of the month of death, HMRC charges interest on the outstanding amount. The rate is currently several percentage points above the Bank of England base rate. Penalties on top of interest are reserved for failure to file the IHT400 (which has a 12-month deadline) or for deliberate concealment.
How Curtis Legal can help
The IHT process is complex, the deadlines are tight, and the wrong choice can cost thousands. Our specialist probate solicitors handle the entire IHT process — from valuing the estate and completing the IHT400, through arranging payment via the Direct Payment Scheme, to applying for probate.
Call us on 0800 214 216 for a free, no-obligation discussion of your situation.
Frequently Asked Questions
How do I pay inheritance tax before probate is granted?
The most common method is the Direct Payment Scheme using form IHT423. The deceased’s bank pays HMRC directly from the deceased’s accounts before probate. Other options include executor loans, beneficiary contributions, or electing to pay property IHT in 10 instalments.
What is the IHT423 form?
The IHT423 is the form used to instruct a bank, building society, or NS&I to pay inheritance tax directly to HMRC from the deceased’s accounts before probate is granted. A separate IHT423 is needed for each institution.
How long does the Direct Payment Scheme take?
Most banks process IHT423 forms within 2 to 4 weeks of receiving them. Submit forms early to avoid HMRC interest charges, which begin six months after the end of the month of death.
Do all banks participate in the Direct Payment Scheme?
Most major UK banks participate, including Barclays, Lloyds, NatWest, HSBC, Santander, Nationwide, and Halifax. Smaller institutions and some online-only banks may not — always check before relying on the scheme.
What is an executor loan?
An executor loan is a short-term loan from a specialist lender to pay inheritance tax before probate. The loan is repaid from the estate once probate is granted. Interest rates are typically 6% to 9%, higher than HMRC’s interest rate, so it should be a last resort.
Can you pay inheritance tax in instalments?
Yes, for certain assets — mainly property, business assets, and controlling shareholdings — you can pay IHT in 10 equal annual instalments. Only the first instalment is due before probate. Interest is charged on the outstanding balance.
