Can I Pay Inheritance Tax in Installments in the UK? A Practical Guide

Belgravia Capital
May 31
3 min read

When a loved one passes away, handling their estate can be emotionally and financially challenging - especially if the estate includes significant assets like property.

One of the most pressing questions executors often face is:

“Can I pay inheritance tax in instalments?”

The good news is: Yes, you can - in certain circumstances.

In this guide, Belgravia Capital Wealth Management explains when and how Inheritance Tax (IHT) can be paid in instalments, and what you need to consider if you're facing a large tax bill.

Understanding When Inheritance Tax Is Due

Inheritance Tax in the UK is typically payable on estates worth over £325,000 (or £500,000 if the main residence is passed to a direct descendant).

The standard rate is 40%, applied to the value of the estate above the threshold.

When is IHT due?

Six months after the end of the month in which the person died
Interest is charged on any unpaid tax after this deadline

So if someone dies in January, IHT is due by 31 July.

Can I Pay Inheritance Tax in Installments?

Yes - HMRC allows inheritance tax to be paid in installments over up to 10 years, but only for certain types of assets, typically:

Land and property
Shares or securities
Businesses or business interests

If the estate is largely tied up in these kinds of assets, paying the full IHT bill upfront may not be realistic.

That’s where instalment options come in.

How the Instalment Option Works

Which Assets Qualify?

You can pay IHT in installments on:

Houses and flats (residential property)
Agricultural or business property
Shares in private companies

Payment Term:

You can pay in up to 10 annual installments
The first installment is due by the IHT deadline
You can pay off the remaining balance early at any time

Interest Charges:

HMRC charges interest on the unpaid balance, starting from the IHT due date
The current interest rate (as of 2025) is around 7.75% — but it can change

If the Asset Is Sold:

The remaining balance becomes due immediately once the asset is sold
You cannot continue the installment plan after a qualifying asset is converted to cash

What If the Estate Includes Both Liquid and Illiquid Assets?

Often, estates are a mix of:

Liquid assets (cash, investments, etc.)
Illiquid assets (property, businesses)

In these cases:

HMRC expects you to use liquid assets to pay as much of the IHT bill as possible
Installments are permitted on the remaining portion, typically linked to the property or business

Example: Paying IHT on a Property

Let’s say your parent leaves you a house worth £800,000, and the estate qualifies for no special reliefs.

The IHT due on this property (after allowances) is £120,000.

You can apply to:

Pay £12,000 upfront by the IHT deadline
Then pay nine further installments of £12,000, plus interest

If you later sell the property, you’ll need to pay off the remaining balance immediately.

How to Apply for Installments for your Inheritance Tax Bill

When submitting the IHT forms (typically IHT400), you must:

Indicate that you want to pay by installments
Specify which assets you’re using the option for
Include any valuations and supporting documents

HMRC will calculate the interest due and confirm your payment schedule.

Key Considerations and Risks

Interest costs can be substantial over 10 years
You’ll need to budget for annual payments
If property values drop, selling the asset later may not cover the outstanding tax
Failure to keep up with payments could result in penalties or enforcement action

Installment plans provide flexibility, but should be used carefully and ideally as part of a wider estate plan.

Alternative Options to Manage IHT

If you’re worried about paying IHT, consider:

Setting up life insurance written in trust to cover the IHT bill
Gifting assets during your lifetime to reduce the estate size
Using trusts to move wealth outside the estate
Planning early, especially for family homes or business assets

How Belgravia Capital Wealth Management Can Help with IHT planning and instalments

We provide expert advice to individuals and families navigating estate complexities.

Our services include:

Assessing whether installment payments are the right option
Preparing estate valuations and IHT forms
Modelling payment timelines and interest costs
Advising on tax-efficient wealth transfers and liquidity planning

With our guidance, executors and beneficiaries can avoid unnecessary stress and penalties.

In Conclusion: Can You Pay Inheritance Tax in Instalments?

Yes - if the estate includes qualifying assets like property or business interests, HMRC offers a 10-year installment plan.

But it’s essential to understand the rules, risks, and responsibilities involved.

Professional advice ensures you're making the best financial decisions at a difficult time.

Need help managing an inheritance tax bill or structuring your estate?