Advanced Taxation (UK) · Inheritance tax: the basic principles of computing transfers of value

IHT Payment, Due Dates, Interest and Liability

Updated 11 October 2026

IHT payment rules tell you who pays, when, and what interest applies. Lifetime chargeable transfers are due by 30 April after the tax year (April to September gifts) or six months after the month-end (October to April gifts). Tax on death is due six months after the month-end. The ATX-UK tables give an assumed 8.50% rate on underpaid tax.

Understand Payment, Due Dates, Interest and Liability

Calculating IHT is only half the job. ATX questions also ask when the tax must be paid, who must pay it, and what it costs to pay late. These points drive cash flow advice to clients and executors.

Due dates. For a chargeable lifetime transfer (CLT) made between 6 April and 30 September, tax is due on 30 April in the next tax year. For a CLT made between 1 October and 5 April, tax is due six months after the end of the month of the gift. Extra tax on a CLT or a failed PET because of death within seven years, and tax on the death estate, is due six months after the end of the month of death.

Liability. For a CLT into a trust, both the donor and the trustees (as the transferee) are liable for the lifetime tax. In practice the trustees often pay it. If the trustees bear the tax, the transfer is not grossed up. Grossing up at 20% applies only when the donor bears the tax, because the donor's payment is itself a further transfer of value. For a PET that becomes chargeable, the donee is primarily liable for the tax. On the death estate, the personal representatives pay the tax on the assets they control. Tax on a CLT that becomes more expensive on death is the responsibility of the persons liable for the lifetime tax, including the donor's personal representatives.

Instalments. Some tax can be paid in ten equal yearly instalments. The first instalment is due on the normal due date. The option is available only for qualifying property:

Land and buildings.
A business or an interest in one.
Shares, but only a controlling holding, or unquoted shares that meet the conditions in the question.

On death it applies to the tax on that property. On a lifetime transfer it applies only where the donee bears the tax, and the donee must still own the property when the tax is paid. Check the question for the conditions.

Interest-free instalments apply to land, buildings and a business. Interest is charged on instalments of tax on shares or securities, so apply any instruction given in the question.

Interest. Interest runs on unpaid tax from the due date until the day of payment. The ATX-UK tables give assumed rates of 8.50% on underpaid tax and 3.50% on overpaid tax. These are general rates in the tables, not rates set specifically for IHT. Interest on overpaid tax runs from the date of payment to the date of repayment. Interest is charged even if the delay is caused by a late valuation.

Key rules to remember

Rates of tax: Nil rate band £325,000; excess taxed at 20% (lifetime) and 40% (death); Use the tables ACCA provides. Figures in the tables are in pounds (£325,000).
CLT due date (April to September): 30 April following the end of the tax year of the gift; Applies to gifts made 6 April to 30 September.
CLT due date (October to April): 6 months after the end of the month of the gift; Applies to gifts made 1 October to 5 April.
Death-related due date: 6 months after the end of the month of death; Covers the death estate and extra tax on CLTs and failed PETs.
Instalment option: 10 equal annual instalments, first on the normal due date; For qualifying property only. Check whether interest runs on the instalments.
Interest on underpaid tax: Tax × 8.50% × months late ÷ 12; The rate is in the ATX-UK tables. Overpaid tax earns 3.50%.
Grossing up a CLT paid by donor: Gross gift = net gift ÷ 0.8 for the part above the nil rate band; Use only when the donor pays the lifetime tax. Grossing up uses the 20% lifetime rate.
Taper relief on extra death tax: Reduce death tax by 20%, 40%, 60% or 80% by years from gift to death; Applies to the tax, not the value. Rates are in the ATX-UK tables.

How to solve Payment, Due Dates, Interest and Liability questions

Use this order for any payment, due date, interest or liability question.

1Identify each transfer: CLT, PET that has failed, or the death estate.
2Fix the key date: gift date or death date. For CLTs, note whether it falls between April and September or October and April.
3Work out the due date using the rule for that transfer. Show the month-end calculation.
4State who is liable first and who is liable if they do not pay. Say whether grossing up applies.
5Check whether the instalment option is available. If so, split the tax by property, divide by ten and list the dates.
6Calculate interest from the due date to the payment date with the table rate: tax × rate × months ÷ 12. Use the overpaid rate only for repayments.
7Finish with advice: cash flow, who should fund the payment, and any practical action such as selling assets or paying early.

Quickest way: Date, person, interest in three lines

When to use it: Use when the question asks for a short list of payment dates and liabilities with little calculation.

Write the date of the gift or death, then the due date next to it.
Write the liable person next to each tax charge.
Write the instalment test in one line: qualifying property and whether the donee or executors hold it.
Compute interest as tax × 8.50% × months ÷ 12 and quote the rate source.

Common mistakes in Payment, Due Dates, Interest and Liability

Using six months from the gift date for every CLT.
Students remember the six-month rule from death and apply it everywhere.
Fix: Check the gift month. April to September gifts are due on 30 April of the following tax year.
Making the donee liable for a CLT and the donor liable for a PET.
The roles are mixed up when learning liability rules.
Fix: For a CLT into a trust, both the donor and the trustees are liable. For a PET that becomes chargeable the donee is primary.
Forgetting to gross up when the donor pays the lifetime tax.
Students see the tax as a separate cost and not as a further gift.
Fix: If the donor bears the tax, gross up the excess above the nil rate band. If the trustees bear it, do not gross up.
Applying the instalment option to all property.
The option is learned as a general relief for large tax bills.
Fix: Check that the property qualifies, such as land or a business. Allocate the tax only to that property.
Using the wrong interest rate or counting months from the gift date.
Students mix the official rate with the late payment rate, or count from the wrong date.
Fix: Use 8.50% for underpaid tax and 3.50% for overpaid tax. Count from the due date to the day paid.

Worked examples

Example 1

Mia made a gift of £400,000 on 1 August 2022 that was a PET. She had no earlier transfers and had used no annual exemptions. Assume an IHT annual exemption of £3,000 a tax year, with any unused exemption carried forward one year. She died on 20 February 2026. Tax was paid on 30 November 2026. Calculate the tax payable, the due date and the interest, and state who is liable.

Show the solution

Annual exemptions: the £3,000 IHT annual exemption is an assumption stated in the question, not a figure from the ATX-UK tables extract (the £3,000 in the tables is the CGT annual exempt amount). 2022/23 £3,000 plus 2021/22 £3,000 brought forward (unused) = £6,000.
Chargeable transfer = £400,000 − £6,000 = £394,000.
Nil rate band £325,000. Excess = £394,000 − £325,000 = £69,000.
Tax at the death rate of 40% = £69,000 × 40% = £27,600.
Years between gift and death are more than 3 but less than 4, so taper relief is 20%. Tax payable = £27,600 × 80% = £22,080.
Due date: six months after the end of the month of death, which is 31 August 2026. The donee is liable.
Payment on 30 November 2026 is 3 months late. Interest = £22,080 × 8.50% × 3 ÷ 12 = £469. The 8.50% is the assumed underpaid-tax rate in the ATX-UK tables (Table 18), not a statutory IHT rate.

Answer: Tax £22,080, due 31 August 2026, paid by the donee. Interest for three months at the assumed 8.50% table rate is £469.

Example 2

Raj died on 12 September 2025. His estate was £1,000,000 and included freehold land worth £400,000 that is not agricultural and does not qualify for business relief. His nil rate band was fully available and no residence nil rate band applies. The executors pay all tax on the land by instalments and the balance on 31 July 2026. Calculate the tax, the instalments and the interest on the balance.

Show the solution

Tax on the estate = (£1,000,000 − £325,000) × 40% = £675,000 × 40% = £270,000.
Tax on the land = £270,000 × £400,000 ÷ £1,000,000 = £108,000.
Tax not eligible for instalments = £270,000 − £108,000 = £162,000.
Instalments = £108,000 ÷ 10 = £10,800 a year. Land qualifies for interest-free instalments, so no interest runs on the land instalments.
Due date: six months after the end of September 2025 = 31 March 2026. The first instalment is due then, and later ones each 31 March to 2035.
The balance of £162,000 was due on 31 March 2026 and paid on 31 July 2026, which is 4 months late.
Interest applies only to the £162,000 balance: £162,000 × 8.50% × 4 ÷ 12 = £4,590.

Answer: Total tax £270,000. Land instalments are 10 payments of £10,800 from 31 March 2026, with no interest on them. Interest on the late £162,000 balance is £4,590.

Exam tips

Write the due date as a full date, not just a rule. Examiners award marks for the calculation of the date.
State both who is primarily liable and who is secondarily liable. One name alone often loses a mark.
Show interest as tax × rate × months ÷ 12 so you earn method marks even if the months are wrong.
In planning advice, mention cash flow: instalments, selling assets, life insurance or paying early to limit interest.
Use the ATX-UK tables for the 8.50% and 3.50% interest rates. Do not rely on memory.

Practice questions from Inheritance tax: the basic principles of computing transfers of value

Payment, Due Dates, Interest and Liability: frequently asked questions

When is IHT due on a lifetime gift?

For a CLT made between 6 April and 30 September, tax is due on 30 April the following year. For a CLT made between 1 October and 5 April, tax is due six months after the end of the month of the gift. A PET has no lifetime tax. Tax becomes due only if the donor dies within seven years.

Who pays IHT on a PET that becomes chargeable?

The donee is primarily liable for the tax. The due date is six months after the end of the month of the donor's death. The extra tax is reduced by taper relief where the gift was made more than three years before death.

What interest rate applies to underpaid IHT in ATX?

Use the 8.50% rate for underpaid tax from the ATX-UK tables. Interest runs from the due date to the day of payment. Overpaid tax earns 3.50% from the date of payment to the date of repayment.

Can IHT be paid in instalments?

Yes, for qualifying property such as land and buildings, a business or certain shares. Tax is paid in ten equal annual instalments. The first is due on the normal due date. Check the conditions and whether interest applies in the question.