IHT Instalments Calculator — Inheritance Tax in 10 Annual Payments
Calculate inheritance tax instalments for property and business assets. See annual IHT payments, interest charges, and total cost of paying IHT in 10 instalments vs lump sum.
IHT Instalments Calculator — Inheritance Tax Paid in 10 Annual Instalments
When IHT applies to illiquid assets like property or business, you may be eligible to pay in 10 annual instalments rather than as a single lump sum.
Frequently Asked Questions
What assets qualify for IHT instalments?
IHT instalments (paying in 10 annual payments) are available for: (1) Land and buildings (including property), (2) A business or interest in a business, (3) Shares in an unlisted company, (4) Shares in a listed company where HMRC agrees that lump sum payment would cause hardship. The instalments apply to the IHT attributable to these assets, not other IHT.
When is the first IHT instalment due?
The first instalment is due 6 months after the end of the month of death — the same as the standard IHT payment deadline. So for a death in March 2026, the first payment (first instalment or lump sum) is due by 30 September 2026. Instalments are then due annually on the same date.
Do I pay interest on IHT instalments?
Yes. HMRC charges interest on the outstanding IHT balance from the due date. The interest rate is the Bank of England base rate plus 2.5% (approximately 7.75% for 2025/26). For property, interest is also charged on each unpaid instalment from its due date.
Is interest charged differently for property and business assets?
For land and property: interest is charged on all outstanding instalments from the due date of each. For business assets and unlisted shares: interest is only charged on overdue instalments. This makes business/share IHT slightly cheaper to defer than property IHT.
Can the instalment period be extended beyond 10 years?
No. The instalment period is fixed at 10 annual instalments. However, you can pay off the balance early at any time without penalty — this reduces the total interest payable.
What happens if the property is sold during the instalment period?
If the property on which instalments are being paid is sold, all outstanding instalments become due immediately — they must be paid within a short period of the sale completion. This is a crucial consideration when planning estate administration.
Can instalment payments be negotiated with HMRC?
The statutory right to pay by instalments doesn't require HMRC agreement for qualifying assets. However, if you're having difficulty making instalments, HMRC may agree a Time to Pay arrangement for overdue amounts.
How do I elect for instalment treatment?
You elect for instalment treatment on the IHT400 form (Accounts for Inheritance Tax) when filing with HMRC. The executor or personal representative must tick the relevant box and specify which assets qualify. HMRC will confirm the instalment schedule.
Can partial instalments be paid?
Yes. You can pay any instalment amount above the minimum annual instalment at any time. Any overpayment reduces the outstanding balance and therefore reduces future interest charges. Complete early payment removes all future interest.
Is there any relief if the property value falls after the death date?
Yes. If qualifying property falls in value between the date of death and the date of sale (within 4 years), you may be able to claim a deduction to reduce the IHT payable (loss on sale relief). This is complex — seek specialist advice.
Can IHT instalments be used for overseas property?
UK situs property (property located in the UK) qualifies for instalment treatment. Overseas property is generally not eligible for UK IHT instalments. Note that UK domiciled individuals pay UK IHT on worldwide assets, but instalments only apply to UK-sited qualifying assets.
What happens to instalment payments when the estate is distributed?
Instalment payments are a liability of the estate and must be paid from estate assets or future income. If the estate is distributed before all instalments are paid, the personal representatives remain liable. Beneficiaries who receive assets subject to instalment IHT should ensure the remaining liability is covered.