The Inheritance Tax Loan

Inheritance tax loans explained: your guide to funding an IHT liability

When someone dies, Inheritance Tax (IHT) can fall due before the people administering the estate can access its assets. This is a well-recognised problem in estate administration, particularly where an estate is rich in property but short on cash.

An inheritance tax loan is one way some estates address this funding gap. However, borrowing to pay a tax liability is a significant decision and is not automatically the right approach for every situation.

This guide explains how inheritance tax loans fit into the wider probate process, when they may be worth considering, and what to assess carefully before proceeding.

The Probate Network is an Introducer Appointed Representative for probate loan introductions, and we work with several probate loan providers in the UK. You can request information and quotes from participating providers through this website. We do not give financial advice and we do not recommend one lender over another. Our role is to put you in touch so you can compare what is on offer.

Before you read on, one thing is worth saying plainly. Borrowing is not the only way to solve this problem, and it is often not the cheapest. We set out the free alternatives below, and you should rule those out first. If you still want to compare borrowing costs, you can get information and quotes from providers through this website.

Why an IHT liability can be so difficult to fund

The executor cannot normally obtain a Grant of Probate without first paying IHT, but most estate assets — bank accounts, property, investments — cannot be accessed without that grant. This circular problem is sometimes called the “IHT catch-22.”

In practice, the challenge often looks like this:

• Executors cannot access estate funds until probate is granted
• Property cannot usually be sold until the probate application is complete, because the legal authority to sell depends on the grant
• Financial institutions typically freeze the deceased’s accounts until probate is in place
• Investment portfolios generally require probate before they can be liquidated

Inheritance tax is due by the end of the sixth month following the month in which death occurred. This applies regardless of whether final estate valuations have been completed or probate obtained. From 9 January 2026, HMRC charges interest at 7.75% per annum on late IHT payments. The rate moves with the Bank of England base rate, so executors should check the current figure on HMRC’s published rates page rather than relying on a quoted historical number.

For property-heavy estates, the central question is often: how do you pay inheritance tax without selling the property first?

Two free routes to try before you borrow

The catch-22 above is real, but it has two official escape routes. Both are free. Check them before you look at any loan.

The Direct Payment Scheme

HMRC runs the Direct Payment Scheme that lets the deceased’s own money pay the tax before probate is granted. You complete form IHT423 and send it to the bank, not to HMRC. The bank then pays HMRC directly out of the deceased’s account. Nothing is released to you, which is why the bank is willing to do it.

You need a separate form for each account. The scheme now covers more than current accounts. Building society accounts, National Savings and Investments accounts, brokers’ accounts, investment firm accounts and wealth management accounts can be used this way if the provider participates. So it is worth asking every institution holding the deceased’s money, not just the main bank.

Asking HMRC to wait

If the estate genuinely cannot raise the money, you can ask HMRC to postpone payment until after the grant. This is called a grant on credit. HMRC will expect to see that you have tried the other routes first, and interest still runs on the unpaid tax. Even so, it costs nothing to apply, and it may remove the need to borrow at all.

Other options worth considering include selling an asset the estate can release without a grant, or a beneficiary lending the estate the money and reclaiming it later. A loan is the right answer only once these have been ruled out.

What is an inheritance tax loan?

An inheritance tax loan is borrowing arranged specifically to meet an estate’s IHT liability. Unlike broader probate borrowing, this type of loan is structured around a defined tax sum, a specific repayment trigger, and a direct link to HMRC.

Funds are typically paid directly to HMRC, which then allows the probate application to progress.

This differs from two related products. An Executor’s Loan covers wider estate administration costs, including other testamentary expenses. An Inheritance Advance Loan (sometimes called an inheritance loan) allows beneficiaries to gain early access to an expected inheritance before the estate is fully distributed.

For an overview of all three product types, read our guide to probate loans.

Borrowing versus using HMRC’s instalment option

The comparison that matters

A key question for any executor is whether a commercial loan is better value than using HMRC’s own payment options.

Where an estate includes qualifying assets such as land, certain unlisted shares, or business property, executors may elect to pay IHT in annual installments over ten years under section 227 of the Inheritance Tax Act 1984. For most estates, the installment route is a cashflow tool rather than a cost-free deferral. Interest is usually charged on the outstanding balance from the due date of the first installment onward, at the rate set by HMRC.

There is an important exception, and it can change the whole decision. For assets inherited from 6 April 2026 onwards, installments are interest-free if the asset qualifies for Agricultural Relief or Business Relief. Interest is still charged if an installment is paid late, and the remaining tax must be paid in full if the asset is sold. For a farm or a family business that qualifies, this can make installments cheaper than a commercial loan. Check which category your estate falls into before you compare anything.

Executors considering an inheritance tax loan should review probate loan rates and associated charges and compare them against the current HMRC interest rate of 7.75% per annum.

When borrowing may make more sense

Where HMRC interest is lower than commercial borrowing costs, installments may represent a more proportionate option. However, some executors may accept a higher commercial rate in return for simplicity. Probate loans are typically repaid in full when estate funds become available — usually on the sale of probate property or on estate distribution — so there are no ongoing monthly repayments during the administration period.

There may also be circumstances where completing probate quickly has strategic value, for example where a property sale is imminent. In those cases, the cost comparison alone does not tell the whole story. The decision to take an inheritance tax loan involves estate strategy and risk tolerance, not just headline rates.

If you have weighed up the installment route and want to see what borrowing would actually cost, you can get information and quotes from providers through The Probate Network.

How lenders assess an inheritance tax loan

An IHT loan is assessed very differently from a conventional personal loan. Rather than focusing primarily on the executor’s income or employment status, lenders look first at the structure and strength of the estate itself. Because repayment is expected to come from estate assets — typically following property sale or the release of funds after probate — the estate becomes the central underwriting consideration.

Estate valuation

The starting point for most lenders is the overall estate value. This is not a rough estimate but ideally a valuation formally documented for probate purposes. Lenders will want to understand the gross value of assets, the net value after liabilities, the proportion represented by property, and whether valuations have been professionally prepared.

Where property forms the majority of the estate, lenders typically rely on formal market appraisals or independent professional valuations. Where estate valuations are speculative or disputed, lending may be more difficult or more expensive.

Property equity

When IHT applies to illiquid assets like property, the estate may be eligible to pay the liability in ten annual installments. Equally, IHT loans are frequently secured against estate property. For that reason, equity — the difference between the property’s value and any existing secured borrowing — is critical.

Lenders will assess whether the property is mortgage-free, the size of any outstanding secured loans, the loan-to-value ratio once the IHT loan is added, and the marketability and condition of the property.

A conservative loan-to-value ratio is common in probate lending. This provides a buffer if property values fall or sale proceeds come in below expectation.

The formal IHT calculation

Lenders will review the official IHT calculation, usually via the submitted IHT forms and supporting documents. They are looking to confirm the exact tax liability, whether instalment options have been considered, whether payment deadlines have passed, and the level of interest accruing to HMRC. The size of the requested loan is typically aligned closely with the confirmed tax figure.

Legal status of the probate application

The stage the probate process has reached materially affects lending risk. If probate has already been applied for — or granted — the lender has greater certainty around legal authority and timing. Lenders will want to know who is acting as executor or administrator, whether there is a valid will, whether the estate is contested, and whether solicitors are involved.

Unresolved disputes, unclear entitlement or complex estate structures can delay probate and extend the loan period. Because interest often accrues until repayment, lenders must weigh this time risk carefully.

Projected administration timeline

Time is one of the most significant variables in the total cost of an IHT loan. Unlike a conventional loan with fixed monthly repayments, an inheritance tax loan is commonly structured so that interest rolls up and is repaid when the estate settles. The longer probate takes, the higher the total repayment.

Lenders will therefore assess the anticipated administration timeline: the expected time to grant, the marketing period for any property, whether foreign assets are involved, and the realism of the proposed exit strategy. Executors sometimes underestimate how long probate can take, particularly where property is involved, and lenders will often apply conservative assumptions when modelling duration.

The cost of an inheritance tax loan

The headline interest rate is rarely the full picture. The overall cost depends on how interest is structured, how long the loan runs for, and what additional fees apply. We cover this in detail in our article Probate Loan Rates and Associated Costs.

Interest rates and how they are applied

Interest may be charged on either a simple or compound basis. With simple interest, the rate applies only to the amount originally borrowed. With compound interest, it accrues on both the original loan and the accumulated interest.

In probate lending, interest often rolls up rather than being paid monthly. This means no regular repayments during probate, with the full amount — principal plus interest — repaid once the estate can settle the loan. This structure can help cash flow, but time directly affects cost. If probate completes quickly, total interest may remain proportionate. If administration is delayed, the accumulated figure can increase materially.

Executors should therefore request illustrations showing the total repayment at different timeframes — for example, at six, twelve and eighteen months — rather than relying solely on the quoted rate.

Arrangement fees and facility charges

In addition to interest, many IHT loans include an arrangement or facility fee. This is typically charged as a percentage of the loan amount and may be paid upfront or added to the loan balance.

Legal and valuation costs

Because IHT loans are usually secured against property, professional valuation, survey and legal services may be required. Some lenders include these within the overall facility; others require them to be settled separately. Executors should clarify at the outset whether these costs are included in quoted figures or treated as additional charges.

Early repayment considerations

Although inheritance tax loans are typically short-term facilities, always check whether a minimum interest period applies or whether early repayment triggers additional fees. Some agreements require a minimum number of months’ interest regardless of when repayment occurs. Others allow flexible settlement once property is sold.

Who is on the hook if the estate falls short?

This is the question executors most often forget to ask, and it matters more here than almost anything else on this page. An inheritance tax loan is not the same as an inheritance advance taken by a beneficiary, which is usually non-recourse.

Depending on how the facility is written, you may be signing in your personal capacity as well as on behalf of the estate. Some lenders also ask executors for a personal guarantee. If the estate then sells for less than expected, or the administration runs long and the rolled-up interest grows, the shortfall could become your problem rather than the estate’s.

So ask every provider three questions in writing. Am I personally liable for this debt? Are you asking me to give a personal guarantee? What happens if the estate cannot repay in full? Do not rely on a verbal answer, and consider asking the estate’s solicitor to review the agreement before you sign.

FCA regulation and your protections

The Probate Network strongly recommends checking a provider’s status on the Financial Services Register. Where it applies, the FCA’s Consumer Duty requires firms to act to deliver good outcomes for retail customers. FCA rules also require communications and financial promotions within scope to be clear, fair and not misleading, accurate and balanced. Costs and fees should be stated clearly enough for you to understand them and make a meaningful comparison.

If costs are not presented clearly and transparently, that is a warning sign. Seek a different provider.

One distinction is worth drawing here, because it is easy to miss. A firm being regulated by the Financial Conduct Authority is not the same as every product it offers being a regulated credit agreement. Lending to an estate is often structured differently from lending to a consumer, and that affects which protections apply.

So ask each provider two direct questions. Is this agreement a regulated credit agreement? And if something goes wrong, could I take a complaint to the Financial Ombudsman Service? You can also check any firm’s status yourself on the Financial Services Register.

The Probate Network does not lend; we introduce executors to lenders.

We are an Introducer Appointed Representative. In plain terms, that means we are permitted to introduce you to providers and to distribute financial promotions on behalf of the firms that appointed us. Those firms are responsible for our regulated activities within the scope of our appointment. We are not directly authorised by the FCA or authorised to advise you on which product to take, and we do not do so.

Is an inheritance tax loan right for your estate?

An inheritance tax loan addresses a specific problem. However, it should only be considered after reviewing HMRC’s instalment options, assessing projected interest exposure under both routes, reviewing the estate’s liquidity, confirming regulatory protections, and taking independent professional advice.

Once you have worked through that list, comparing real numbers is the sensible next step. You can get information and quotes from several providers at once through this website, without any obligation to proceed.

For advice on your own circumstances, speak to a solicitor. You can book a free legal consultation through The Probate Network.

Request comparison quotes

The Probate Network does not promote or recommend specific lenders. Our role is to provide balanced information so executors and families can approach inheritance tax decisions with clarity.

We can introduce you to probate loan providers whose status we have checked on the Financial Services Register. This does not mean every agreement they offer is regulated. By completing the form below you can receive comparison proposals from up to three specialist inheritance tax loan companies.

When you receive proposals, it may help to read them alongside:

• Compare probate loan companies

This article is for general guidance only and does not constitute legal, tax or financial advice. Rules and thresholds can 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 or contact an FCA-regulated loan provider.

Frequently asked questions

What is the current HMRC interest rate on unpaid inheritance tax?

From 9 January 2026, HMRC charges interest at 7.75% per annum on late IHT payments. The rate moves with the Bank of England base rate, so always check the current figure on HMRC’s published rates page. Interest accrues daily from the day after the payment deadline passes.

How long do I have to pay inheritance tax before interest starts accruing?

Inheritance tax is due within six months of the end of the month in which the person died. For example, a death on 12 March means the deadline is 30 September. Interest generally begins accruing on unpaid tax from the day after that deadline, including where tax is paid by instalments, unless the interest-free instalment rules apply.

Can I pay IHT in instalments instead of taking out a loan?

Where an estate includes qualifying assets such as land, certain unlisted shares, or business property, executors may generally elect to pay IHT in annual instalments over ten years. However, interest usually accrues on the outstanding balance at the current HMRC rate. For assets inherited from 6 April 2026 onwards, instalments are interest-free if the asset qualifies for Agricultural Relief or Business Relief, although interest is still charged on late instalments. Executors should compare the total cost of instalments against the total cost of commercial borrowing before deciding which route suits the estate.

Do I need an FCA-regulated lender for an inheritance tax loan?

A provider’s FCA status does not by itself mean that an inheritance tax loan is regulated or that particular protections apply. Where the Consumer Duty applies, firms must act to deliver good outcomes for retail customers. FCA rules also require communications and financial promotions within scope to be clear, fair and not misleading. It does not mean the lender is acting as your adviser. Always confirm a lender’s status on the Financial Services Register, and ask whether the agreement is regulated and whether the Financial Ombudsman Service could consider a complaint. Our guide to probate loan companies sets out what to compare before you commit, and how to pay inheritance tax before probate covers the routes that cost nothing.