Form IHT423 is how you ask a bank, building society or investment provider to pay inheritance tax directly to HMRC from the deceased’s own account, before the grant of probate is issued.
It solves the problem at the centre of most estate administrations: the tax is due before the grant, but the money that would pay it is frozen until the grant arrives. The Direct Payment Scheme cuts through that, and it costs nothing.
This guide explains what the scheme does, how to complete and submit the form, and what to do when it does not cover the whole bill. It applies to England and Wales.
What the Direct Payment Scheme does
HMRC’s guidance puts it plainly: you can ask banks, building societies or investment providers to pay some or all of the inheritance tax due from the deceased person’s accounts. That is the Direct Payment Scheme.
The money never passes through your hands. The institution transfers it straight to HMRC, quoting the inheritance tax reference, and it counts as payment of the tax. You can start the process before you have probate.
The scheme is not limited to high street banks. It covers building societies, National Savings and Investments, investment brokers and investment management firms. Where the money is held in investments rather than cash, the form asks the firm to sell all or part of the holding and transfer the proceeds.
It is voluntary, and that matters
HMRC’s own wording is that each institution will do this in a different way and some may not be part of the Direct Payment Scheme. There is no obligation on a bank to take part, so check with the bereavement team before you rely on it.
What you need before you start
One thing has to be in place first: an inheritance tax payment reference number. The form is explicit that without it, your payment cannot be matched to the account.
You apply to HMRC for the reference, and you need to do it in good time. It is not issued instantly, and the scheme cannot proceed without it, so this is the step to get moving on early rather than in the last fortnight before the six-month deadline.
How to complete and submit IHT423
One form per account
You need a separate IHT423 for each account you are paying tax from. Three accounts across two banks means three forms. Each one goes to the institution holding that account.
Everyone applying for the grant has to sign
The form carries signature lines for up to four personal representatives, and its guidance is that it is important that everyone applying for the grant of representation signs it. A form signed by only one of three executors will come back.
Send it to the bank, not to HMRC
This is the single most common mistake. The form states that you should send it to the bank, building society, NS&I, brokerage company or investment management firm, and not to HM Revenue and Customs. Only the IHT400 and its schedules go to HMRC, at Inheritance Tax Team, BX9 1HT.
Tick the box on the IHT400
You also need to tell HMRC you are using the scheme. On page 12 of the IHT400 there is a question asking whether you want to use the Direct Payment Scheme. Answer yes, and complete a separate IHT423 for each account you are paying from.
You can download the current version of the form from the GOV.UK IHT423 page. Our guide to probate forms covers the rest of the IHT series.
What happens next
The institution processes the request in its own way and transfers the money to HMRC. Timescales vary and are not set by HMRC, so if the deadline is close it is worth asking the bereavement team how long they take, and chasing rather than assuming.
Where it goes wrong, and what to do
The institution is not part of the scheme
Ask what they will do instead. Many banks will release funds before the grant at their own discretion even where they do not operate the Direct Payment Scheme, and most will settle a funeral director’s invoice directly. There is no legal threshold for discretionary release and each bank sets its own limit, so the answer is only obtainable by asking.
There is not enough money in the accounts
This is the usual outcome where the estate’s value is in a property. The Direct Payment Scheme pays what is there; it cannot create liquidity that does not exist. You are then looking at the other routes, covered below.
The account was held jointly
An account held jointly with someone who survived the deceased will usually pass to the survivor by survivorship, and is not straightforwardly an estate account for this purpose. Where a joint account is involved, ask the institution how it treats it before completing a form. Note separately that money passing by survivorship still counts towards the estate’s value for inheritance tax even though it bypasses probate.
You have not got the reference yet
Apply for it now. Nothing in the scheme can happen without it.
If the Direct Payment Scheme does not cover the bill
It often will not, and that is normal. The routes to look at next, broadly in order of cost:
| Route | What it does | Cost |
|---|---|---|
| Instalments | Spreads tax on land, buildings, businesses and controlling shareholdings over ten annual payments | Interest on the balance, with an exception for agricultural and business property from 6 April 2026 |
| Grant on credit | HMRC postpones payment of some or all of the tax so the grant can issue, against a binding undertaking | Interest continues to run |
| NS&I and government stock | Can generally be released without a grant | None |
| Cash in an investment portfolio | Released by the broker or fund manager | None |
| Joint accounts | Pass to the survivor immediately and can be used | None |
| Bank discretion | Release before the grant, at the institution’s discretion | None |
| Borrowing | A loan against the estate or the property | Interest and fees, plus personal liability for the executors |
Worth knowing: from 1 April 2024, HMRC does not expect personal representatives to seek a commercial loan before applying for a grant on credit. Borrowing is genuinely a last resort rather than a box to tick on the way to one.
Our full guide to paying inheritance tax before probate works through each of these in detail, including how to apply for a grant on credit. If you do need to borrow, our guide to probate loan companies explains the products and what to check first.
Getting help
If the tax position is complicated or the six-month deadline is close, get advice early. 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
What is form IHT423 used for?
IHT423 is the form you use to ask a bank, building society, National Savings and Investments, investment broker or investment management firm to pay inheritance tax directly to HMRC from the deceased’s account. It is how the Direct Payment Scheme works, and it lets the tax be paid before the grant of probate is issued.
Where do I send form IHT423?
To the financial institution holding the account, not to HMRC. The form says so explicitly. You need a separate form for each account, sent to the relevant bank, building society, NS&I, brokerage or investment manager. Only the IHT400 and its schedules go to HMRC, at Inheritance Tax Team, BX9 1HT.
Can I use the Direct Payment Scheme before probate?
Yes. That is the point of it. HMRC’s guidance confirms you can start the process before you have obtained probate, which is what makes the scheme useful, because inheritance tax is due before the grant is issued.
Do all banks take part in the Direct Payment Scheme?
No. Participation is voluntary and HMRC’s guidance states that each institution will handle it differently and some may not be part of the scheme at all. Check with the bereavement team before relying on it. Where a bank does not take part, it may still be willing to release funds before the grant at its own discretion.
Do all the executors need to sign IHT423?
Yes. The form’s guidance is that everyone applying for the grant of representation to the estate should sign it, and it provides signature lines for up to four personal representatives. A form that is not signed by all of the applying executors is likely to be rejected.
Do I need an inheritance tax reference number for IHT423?
Yes, and you need it before you submit the form. The form states that your payment cannot be matched to your account without it. Apply to HMRC for the reference in good time, because it is not issued instantly and nothing in the scheme can proceed without it.
What if there is not enough money in the accounts to pay the tax?
The Direct Payment Scheme pays what is available and no more. For the balance, look at paying by instalments where the tax relates to land, buildings or a business, at a grant on credit from HMRC, and at other liquid sources such as National Savings holdings, cash inside an investment portfolio and joint accounts. Since 1 April 2024, HMRC does not expect personal representatives to take out a commercial loan before applying for a grant on credit.
This article is for general guidance only and applies to England and Wales. It does not constitute legal, tax or financial advice. HMRC forms, references and procedures change, and every estate is different. Always check the current version of any form on GOV.UK before submitting it. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
