Paying Inheritance Tax Before Grant of Probate: Practical Solutions for Executors

The Executor's Dilemma: Settling Tax Before Probate

When managing an estate subject to Inheritance Tax, personal representatives frequently encounter a practical obstacle known as the probate catch-22. To collect cash from bank accounts or sell real estate, executors typically require a Grant of Probate (or Letters of Administration). However, HM Courts and Tribunals Service (HMCTS) will not issue the grant until HM Revenue and Customs (HMRC) confirms that required tax payments or formal arrangements have been processed.

This system ensures tax liabilities are addressed early, but it leaves executors with the responsibility of raising funds before gaining legal control over the estate's capital. Understanding the available mechanisms to release funds directly to HMRC can help you navigate this period smoothly.

Understanding HMRC Deadlines and Interest Rules

According to guidance published on [GOV.UK](https://www.gov.uk/paying-inheritance-tax), Inheritance Tax must be paid by the end of the sixth month after the person died. For example, if a person passed away in January, the tax due must reach HMRC by 31st July.

If tax remains unpaid after this six-month deadline, HMRC charges interest on the outstanding amount. Crucially, executors do not need to wait until the full six months have passed or until all estate administration is complete before making a payment. Making an initial payment on account as early as possible reduces accrued interest and prevents unnecessary delays when applying for the Grant of Probate.

Using the HMRC Direct Payment Scheme (Form IHT423)

Executors are not expected to pay significant tax liabilities out of their own personal savings. As detailed on [GOV.UK](https://www.gov.uk/paying-inheritance-tax/bank-building-society), executors can request banks and building societies to pay HMRC directly from the deceased person's bank account using the Direct Payment Scheme.

Under this arrangement, funds are transferred directly from the deceased person's account to HMRC before probate is granted, without passing through the executor's personal account.

To use this scheme, executors follow these steps:

1. Complete form IHT400 (the main Inheritance Tax account) and form IHT423 (the Direct Payment Scheme instruction) for each bank or building society holding cash. 2. Obtain an Inheritance Tax reference number from HMRC online or by submitting form IHT422. 3. Send the completed form IHT423 directly to each financial institution where the deceased held funds. 4. The bank verifies the instruction and transfers the requested sum directly to HMRC's bank account.

Most major UK banks participate in the Direct Payment Scheme, providing a reliable way to settle tax when the deceased held liquid cash in current accounts, savings, or Cash ISAs.

Alternative Sources for Pre-Probate Tax Payments

If the deceased's bank accounts do not contain sufficient liquid cash to cover the initial tax obligation, executors can explore several alternative arrangements:

• **National Savings & Investments (NS&I):** Products such as Premium Bonds or Income Bonds can often be paid directly to HMRC toward an Inheritance Tax bill using form IHT424.
• **Life Insurance Policies:** If the deceased had a life insurance policy written into a suitable trust, the policy proceeds do not form part of the probate estate. The trustees or named beneficiaries can claim these funds promptly after death and use them to pay the estate's tax liability.
• **Executor or Beneficiary Advances:** Executors or beneficiaries may choose to pay the tax using personal funds or a short-term loan, documented as an advance. Once probate is issued and estate assets are liquidated, these personal funds are reimbursed as an administrative debt of the estate prior to final distribution.

Paying Inheritance Tax in Annual Instalments

When a significant portion of the estate consists of non-liquid assets—such as residential property, land, or certain unlisted business shares—raising immediate cash can be difficult. Published [GOV.UK guidance on paying in instalments](https://www.gov.uk/paying-inheritance-tax/yearly-instalments) states that Inheritance Tax on certain assets such as property or unlisted shares can be paid in annual instalments over 10 years.

The first instalment is due six months after the end of the month in which the person died. Options for paying in instalments apply to:

• Land and buildings (including the deceased's main residence).
• Shares and securities that gave the deceased control of a business.
• Qualifying unlisted shares or securities meeting HMRC criteria.

While paying in instalments allows executors to secure the Grant of Probate and put a property on the market, interest is charged on the remaining balance for most asset types. Furthermore, if the asset is sold before the ten-year period ends, the entire outstanding tax balance, plus any accrued interest, must be settled immediately from the sale proceeds.

How HMRC Informs HMCTS of Tax Clearance

Once the tax liability has been settled or an instalment arrangement established, HMRC confirms receipt of the tax submission. Historically, HMRC issued a stamped paper form IHT421 to the executor or directly to the probate registry.

Under current procedures, HMRC transmits confirmation electronically to HMCTS once tax forms have been processed and payment received. Guidance on GOV.UK advises executors to allow time after sending tax forms and payment before submitting their formal online or paper probate application to HMCTS. This ensures the court system can verify tax clearance without administrative hold-ups.

Professional Assistance with Estate Administration

Calculating Inheritance Tax, submitting formal tax accounts, and arranging pre-probate payments require careful attention to legal detail and strict adherence to HMRC procedures.

At Prudential Probate Services, our pricing is transparent and clearly structured: probate application from £499; full estate administration tailored fixed fee following assessment; complex estates individual quotation. Final fee depends on the circumstances of the estate.

If you require guidance on paying tax or applying for probate, our specialists are available to offer calm, practical support tailored to your situation.