There is a catch built into the probate system, and most executors only discover it once they are in it. Inheritance tax has to be paid before the grant of probate is issued. But the money that would pay it is locked inside the estate, and you cannot get at it until you have the grant.
It is a genuine problem, and it is more common than people expect. It is also solvable, usually without borrowing and usually without selling anything.
This guide sets out every route available to a personal representative who has a tax bill and no accessible cash, in the order HMRC expects you to try them. It applies to England and Wales.
Do you have to pay inheritance tax before probate?
In most cases, yes. Inheritance tax is due by the end of the sixth month after the month of death, and the Probate Registry will not issue a grant until HMRC has confirmed the tax position. So the tax comes first, and the grant follows.
The important qualification is that paid does not always mean paid in full, in cash, by you. HMRC has several mechanisms that let the grant issue without the whole bill being settled from your own resources, and it expects you to use them.
The change most guidance has not caught up with. From 1 April 2024, HMRC states that personal representatives are not expected to seek commercial loans to pay inheritance tax before applying for a grant on credit although loans are an option.
The seven routes, cheapest first
1. Ask the bank to pay HMRC directly
The Direct Payment Scheme lets a bank, building society, NS&I, investment broker or wealth manager pay some or all of the inheritance tax straight to HMRC from the deceased’s own account, before the grant is issued. You do not need probate to use it.
You complete form IHT423, one for each account, and send it to the institution rather than to HMRC. You need an inheritance tax payment reference number first, and the form has to be signed by everyone applying for the grant.
This is the first thing to try, because it costs nothing and it uses money that is already the estate’s. The limitation is that it is voluntary: HMRC’s own guidance notes that some institutions are not part of the scheme.
Our full guide to IHT423 and the Direct Payment Scheme explains how to complete and submit it.
2. Pay by installments, if the asset takes time to sell
This is the route that lets you pay inheritance tax without selling the property, and it is dealt with in its own section below because it is the option most people are looking for.
3. Ask HMRC for a grant on credit
Where you genuinely cannot raise the tax, HMRC can postpone payment of some or all of it so that the grant can be issued. This is the option most executors have never heard of, and it is the most powerful one.
You submit your IHT400 and schedules, then write to HMRC with a letter headed Grants on credit, quoting your reference. The letter needs to confirm that you have tried the other routes, state the maximum you can pay before the grant, and set out how you will raise the balance. Where a property sale is funding it, HMRC will want an accepted offer and an estimated exchange date. It goes to HM Revenue and Customs, Inheritance Tax Team, BX9 1HT.
If HMRC agrees, the personal representatives sign an undertaking, which is a legally binding promise to pay within an agreed timescale. Interest continues to run, so this defers the payment rather than reducing it.
HMRC will still expect you to raise and pay as much as you can before the grant. A grant on credit covers the gap, not the whole bill. HMRC publishes its own guidance on applying for a grant on credit, and the free MoneyHelper guide to inheritance tax is a useful plain-English overview.
4. National Savings and government stock
NS&I holdings and British Government stock can generally be released to pay inheritance tax without a grant. HMRC lists these explicitly among the sources it expects personal representatives to use first.
5. Cash inside investment portfolios, and insurance or investment bonds
If the deceased held an investment portfolio, there is often uninvested cash sitting in it, and the stockbroker or fund manager can usually release it. Insurance and investment bonds may also be available. Both appear on HMRC’s list.
6. Joint accounts
Money in an account held jointly by the deceased and a personal representative, or the deceased and a beneficiary, passes to the survivor by survivorship and is available immediately. It can be used to pay the tax.
Worth noting for the tax figures rather than the payment: money passing by survivorship still counts towards the value of the estate for inheritance tax, even though it bypasses probate. Avoiding probate and avoiding tax are different things.
7. Ask the banks what they will release anyway
Separately from the Direct Payment Scheme, many banks will release funds from the deceased’s accounts before the grant at their own discretion, and most will settle a funeral director’s invoice directly.
There is no legal threshold and no industry standard here. Each institution sets its own limit and most do not publish it, so the only way to find out is to ring the bereavement team and ask.
The one statutory figure is £5,000, under the Administration of Estates (Small Payments) Act 1965, for deaths on or after 10 May 1984. It does not apply to ordinary high street current accounts: it covers a defined list of assets including friendly society and industrial and provident society funds and certain public sector pensions.
And two informal routes
- Your own money. A personal representative who pays an estate expense personally is entitled to be reimbursed from the estate. HMRC expects executors to consider their own assets.
- Beneficiaries lending to the estate. This costs nothing, avoids a third party in the administration, and is often the quickest answer where beneficiaries have the funds.
How to pay inheritance tax without selling the property
This is the situation most executors are actually in: the estate is not short of value, it is short of cash, and the value is in a house that has not sold and may take months to sell.
The answer is the installment option.
How installments work
Inheritance tax on assets that take time to sell can be paid in ten equal annual installments, with the first due at the end of the sixth month after the death. Qualifying assets include:
- Land and buildings, provided they are not sold
- A controlling shareholding in a company
- Certain unlisted shares
- A business, or an interest in a business
- Assets qualifying for Agricultural Relief or Business Relief
You elect for installments on the IHT400 form. It is not automatic.
The interest position, and a nuance to watch
Interest normally runs on the outstanding balance, which is the real cost of spreading the payment.
From 6 April 2026, the outstanding balance on property qualifying for Agricultural Relief or Business Relief is interest-free. Two things are worth being precise about, because a lot of coverage has got this wrong:
- It is an extension, not a new concept. Interest-free installments already applied to several categories, including controlling holdings, qualifying unquoted shares, businesses and interests in businesses, and land whose value is reduced by Agricultural Relief. What changes in April 2026 is that the relief extends to all property eligible for either relief.
- Interest-free means interest-free if you pay on time. Interest still runs on late installments, on any increase following a revised valuation, and from the date of sale where the property is sold.
The trap: selling ends the installment option
If you elect to pay by installments on a property and then sell it, the whole outstanding balance becomes payable immediately, with interest from the date of sale. Installments are for keeping an asset, not for buying time before selling it. If the plan is to sell, a grant on credit is usually the better fit.
If none of that is enough: borrowing
Sometimes the free routes genuinely do not close the gap. An estate with a large tax bill, no liquid assets and a property that will not sell for a year is a real scenario, and borrowing can be the difference between an administration that moves and one that stalls.
If you get to that point, there are a few things to understand before you sign anything.
You will not usually be personally liable
An estate is not a legal person, so an executor signs in their own name. But specialist probate loan financial products are normally written on a no personal recourse basis. The loan is repaid out of estate assets ahead of the beneficiaries, and if the estate turns out to be worth less than expected you are not asked to make up the shortfall. That is why providers expect a solicitor or professional administrator to be handling the estate: they verify the value and repay the lender from estate funds.
Requesting IHT Loan Quotes via The Probate Network
Every probate loan company on our panel is FCA regulated and lends on this basis. Not every probate loan company does. It is a term of the contract rather than a rule of law, so check the wording before you sign anywhere, and note that the protection assumes you keep to the agreement. Misstating the value of the estate, or distributing to beneficiaries before the loan is repaid, can bring your own money back into play.
One relief in your favour
Personal representatives can claim income tax relief on interest paid on a loan taken out to pay inheritance tax, but only for a period ending within twelve months of the loan being made. Worth factoring in, and worth not relying on beyond that window.
Comparing offers
No regulator, government body or consumer organisation publishes cost data for probate lending, so any typical rate you see quoted online is a provider’s marketing or somebody repeating it. Compare on total pounds repayable, not headline rate, and ask every provider the same question in writing: what is the total amount repayable if the estate settles in 6 months, 12 months and 24 months?
Our guide to probate loan companies explains the different products and what to check before you commit, and you can request quotes through this site.
What HMRC expects you to have tried
If you are heading for a grant on credit, this is effectively the checklist you will be asked about. HMRC expects personal representatives to consider all financial sources available to them, including their own assets, and specifically lists:
- The Direct Payment Scheme, through participating banks and building societies
- National Savings and Investments holdings, and British Government stock
- Cash funds held within an investment portfolio
- Insurance and investment bonds
- Money in a joint account held with the deceased
Work through those first, document what you tried and what the answer was, and you will be in a much stronger position whichever route you end up taking.
Getting help
If the estate is complex, the tax position is uncertain or the deadline is close, it is worth getting advice early rather than after a problem has hardened. The Probate Network works with SRA-regulated advisors, and you can find a probate legal advisor or request a quote through this site.
Frequently asked questions
Do you have to pay inheritance tax before probate is granted?
In most cases yes. Inheritance tax is due by the end of the sixth month after the month of death, and the Probate Registry will not issue a grant until HMRC has confirmed the tax position. However, paid does not have to mean paid in full from your own resources. The Direct Payment Scheme lets the deceased’s bank pay HMRC directly before the grant, tax on qualifying assets can be paid in instalments, and HMRC can grant credit for the balance where you genuinely cannot raise it.
How do I pay inheritance tax if all the money is tied up in the estate?
Start with the Direct Payment Scheme, using form IHT423, which lets banks and investment providers pay HMRC directly from the deceased’s accounts before probate. Then look at National Savings holdings, cash inside investment portfolios, and any joint accounts. If there is still a gap, tax on property and business assets can be paid in ten annual instalments, and HMRC can issue a grant on credit for what remains. Borrowing is the last resort, not the first.
How can I pay inheritance tax without selling the property?
Elect on the IHT400 to pay by instalments. Tax attributable to land and buildings can be spread over ten equal annual payments, with the first due at the end of the sixth month after death, provided the property is not sold. Interest normally runs on the outstanding balance, although from 6 April 2026 property qualifying for Agricultural or Business Relief is interest-free if instalments are paid on time. Be aware that selling the property ends the arrangement and makes the whole balance payable immediately.
Does HMRC expect executors to take out a loan to pay inheritance tax?
No. From 1 April 2024, HMRC states that personal representatives are not expected to seek commercial loans to pay inheritance tax before applying for a grant on credit. You are still expected to raise and pay as much as you can from the estate’s own resources first, but a commercial loan is not a precondition.
What is a grant on credit?
It is an arrangement where HMRC postpones payment of some or all of the inheritance tax so that the grant of probate can be issued. You apply by letter headed Grants on credit after submitting the IHT400, confirming what you have tried, how much you can pay now and how you will raise the rest. If HMRC agrees, the personal representatives sign a legally binding undertaking to pay within an agreed timescale. Interest continues to run throughout.
Can a bank release money before probate to pay inheritance tax?
Yes, in two ways. Under the Direct Payment Scheme a participating bank can pay HMRC directly from the deceased’s account using form IHT423. Separately, many banks will release funds at their own discretion before the grant, and most will pay a funeral director’s invoice directly. There is no legal threshold for discretionary release and each institution sets its own limit, so you need to ask the bereavement team.
Am I personally liable if I borrow money as an executor?
Normally no. The probate loan companies on our panel lend without personal recourse. The loan is repaid from estate assets ahead of the beneficiaries, and you are not asked to make up a shortfall if the estate turns out to be worth less than expected. That is why providers expect a solicitor or professional administrator to be handling the estate. It is a term of the contract rather than a rule of law, so check the wording before you sign, and note that the protection assumes you keep to the agreement.
This article is for general guidance only and applies to England and Wales. It does not constitute legal, tax or financial advice, and it is not a recommendation of any product or provider. Tax rules, thresholds and deadlines change, and every estate is different. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
