In yearly instalments
You can pay your Inheritance Tax on things that may take time to sell in equal annual instalments over 10 years.
You must say on Inheritance Tax Account form IHT400 if you want to pay in instalments.
You’ll usually have to pay interest on your instalments. Use the calculator to work out the interest you’ll need to pay.
You must pay the tax in full when you’ve sold the deceased’s assets, such as their house or shares.
When you must pay
The first instalment is due at the end of the sixth month after the death (for example if they died on 12 January, you’d have to pay by 31 July). This is known as the ‘due date’. Payments are then due every year on that date.
You can pay off the full tax and interest at any time. Write to HM Revenue and Customs (HMRC) Trusts and Estates asking for a final assessment (you do not have to include payment).
What you pay interest on
You will not pay any interest on the first instalment unless you pay late. On each later instalment you must pay interest on both of the following:
- the full outstanding tax balance
- the instalment itself, from the date it’s due to the date of payment (if it’s paid late)
What you can pay in instalments
You can pay 10% and the interest each year if you decide to keep the house to live in.
Shares and securities
You can pay in instalments if the shares or securities allowed the deceased to control more than 50% of a company.
Unlisted shares and securities
You can pay in instalments for ‘unlisted’ shares or securities (ones not traded on a recognised stock exchange) if they’re worth more than £20,000 and either of these apply:
- they represent 10% of the total value of the shares in the company, at the price they were first sold at (known as the ‘nominal’ value or ‘face value’)
- they represent 10% of the total value of ordinary shares held in the company, at the price they were first sold at
You can find the face value of a share and whether it’s an ordinary share on the share certificate.
You can also pay in instalments if either of these apply:
- at least 20% of the total Inheritance Tax the estate owes is on assets that qualify for payment by instalments
- paying Inheritance Tax on them in one lump sum will cause financial difficulties
Business run for profit
You can pay in instalments on the net value of a business, but not its assets.
Agricultural land and property
This is rare because most agricultural land and property is exempt from Inheritance Tax.
You can pay in instalments if there is still Inheritance Tax to pay and you were given:
- shares or securities
- part or all of a business
If the gift was an unlisted share or security, it must still have been unlisted at the time of the death.