Inheritance tax on an estate is paid by the executors or administrators (the personal representatives), out of the estate's own money, before the beneficiaries receive their shares. Beneficiaries do not normally pay inheritance tax on what they inherit. The exceptions are people who received lifetime gifts within 7 years of the death, where the gifts exceed the £325,000 nil-rate band, and trustees of settled property. The tax is due by the end of the sixth month after the month of death, and the standard rate is 40% on the value above the available threshold.
The short answer: the estate pays, through its personal representatives
Section 200 of the Inheritance Tax Act 1984 sets out who is liable for the tax charged on death. For property the deceased owned outright, which is most estates, the liable persons are the deceased's personal representatives. That means the executors named in the will or, if there is no will, the administrators appointed by the court.
Being "liable" does not mean paying from your own pocket. Section 204 limits a personal representative's liability to the assets they have received, or would have received but for their own neglect or default. An executor who administers the estate properly pays the tax from estate funds. The practical risk lies elsewhere: if an executor distributes the estate before the tax is settled and the money runs out, that is the kind of default that can make them personally exposed.
HMRC's own summary is plain: funds from the estate are used to pay inheritance tax, the payment is made by the person dealing with the estate, and beneficiaries "do not normally pay tax on things they inherit." They may still face related taxes later, such as income tax on rent from an inherited property or capital gains tax when they sell it.
When someone other than the executor pays
The Act lists several other people who can be liable, depending on where the taxed value sits:
- Recipients of lifetime gifts. A gift made within 7 years of death can become taxable. Where the gifts in that 7-year period exceed the £325,000 threshold, the recipient of the gift pays the tax on it, not the estate;
- Trustees. Where the deceased had an interest in a trust (settled property), the trustees are liable for the tax attributable to that property;
- Anyone in whom the property later vests. Section 200(1)(c) makes any person who ends up holding the taxed property a fallback payer, limited to the value of that property;
- The person who made a lifetime transfer. A gift into a trust can be immediately chargeable at half the death rate (20%), and the person making it is liable, alongside the trustees, while they are alive.
For a failed lifetime gift (a potentially exempt transfer made within 7 years of death), the personal representatives are only a backstop. Section 204(8) makes them liable only if no one else is liable or if the tax is still unpaid 12 months after the end of the month of death. In practice HMRC pursues the recipient first.
Who bears the cost inside the estate
Paying the tax to HMRC and bearing its cost are two separate questions. Section 211 treats tax on property in the UK that passes to the personal representatives as a general testamentary and administration expense, unless the will says otherwise. The usual result is that the tax comes out of the residue, the part of the estate left after specific gifts and legacies.
That has real consequences for how a will is drafted. A cash legacy of £50,000 to a niece will normally be paid in full, while the children who share the residue bear all of the inheritance tax. If the will says a gift is "subject to tax", that beneficiary bears their share instead. Tax on foreign property, and on property in a trust, is not a testamentary expense, so the person receiving that property bears it. If the executors pay tax that falls on someone else's property, they can deduct it from what that person receives or recover it from them.
Worked example
Eleanor dies on 15 June 2026, unmarried, leaving an estate of £500,000. Four and a half years before her death she gave her son £400,000 (assume her annual exemptions were already used). She made no other gifts and did not own a home, so no residence nil-rate band is available.
| Step | Calculation | Tax | Who pays |
|---|---|---|---|
| Gift to son | £400,000 less £325,000 nil-rate band = £75,000 × 40% × 60% (4 to 5 years taper) | £18,000 | Son |
| Estate on death | Nil-rate band fully used by the gift, so £500,000 × 40% | £200,000 | Executors, from the residue |
Gifts are set against the nil-rate band first, in date order, which is why the estate gets no threshold of its own here. The tax on the gift is reduced by taper relief because Eleanor survived it by more than 4 years. Both amounts are due by 31 December 2026, six months after the end of June. If the son cannot or does not pay by 30 June 2027 (12 months after the end of the month of death), the executors can be pursued for it.
Paying the bill: deadlines and practicalities
- Deadline. Tax on death is due six months after the end of the month in which the person died. Interest runs after that date;
- Before probate. Executors usually need to pay at least some of the tax before they can obtain a grant of representation. They can pay from their own account and reclaim it from the estate later, or ask the deceased's bank to pay HMRC directly;
- Instalments. Tax on land and buildings, certain shares and business interests can be paid in 10 equal annual instalments, elected on form IHT400. For assets inherited from 6 April 2026 that qualify for agricultural or business relief, instalments are interest-free;
- Payments on account. Executors can pay before the final figure is known, which stops interest building up.
Pensions from 6 April 2027
The Finance Act 2026 brings most unused pension funds and death benefits into the estate for deaths on or after 6 April 2027. The new section 210 of the 1984 Act makes the personal representatives liable for tax attributable to the pension, even though the pension does not pass through the estate. The person who receives the benefit is also liable. A pension scheme administrator can become liable where it pays out benefits it was required to withhold or fails to pay tax when given notice. Section 211 is also amended so that executors who pay tax on property they never held can recover it from the person who received that property. For executors, this makes it more important to identify pension benefits early, because they can no longer treat them as outside their responsibility.
The rules on liability, burden and payment are in the Inheritance Tax Act 1984, section 200, together with section 199, section 204, section 211 and section 226. The pension changes are in Finance Act 2026, section 67. HMRC's guidance is on GOV.UK: Inheritance Tax and GOV.UK: Pay your Inheritance Tax bill. For the wider rules, see our guides to inheritance tax rules, the IHT400 form and inheritance tax on pensions.
If you are acting as an executor, or want your will to put the tax burden where you intend, our probate and inheritance tax planning teams can help.