Advanced Taxation (UK) · Inheritance tax: the use of exemptions and reliefs in deferring and minimising inheritance tax liabilities

Deferring IHT: Payment Dates, Instalments and Interest

Updated 11 October 2026 · Fact-checked

IHT must be paid by set dates: lifetime tax on chargeable transfers by 30 April after the tax year end, or six months after the month of the gift if later; death tax six months after the month of death. Instalments over ten years are allowed on certain assets. Interest runs from the due date on underpaid tax at the tax-table rate.

Understand Deferring IHT: Payment Dates, Instalments and Interest

Inheritance tax (IHT) is only useful to plan around if you know when cash leaves the estate and who has to find it. This topic covers three things: the due date, the option to spread payment, and interest if you pay late or you overpay and HMRC repays you.

For lifetime tax, a chargeable lifetime transfer (CLT) made between 6 April and 30 September is due by 30 April in the following year. A CLT made between 1 October and 5 April is due six months after the end of the month of the gift. Tax on a potentially exempt transfer (PET) that fails because the donor dies within seven years, and any additional tax on a CLT, is due six months after the end of the month of death.

For the death estate, tax is due six months after the end of the month of death. The personal representatives are liable for the tax on the estate. For lifetime gifts, the donor normally pays the tax on a CLT, though the donee can pay instead. On a CLT, if the donee pays the tax, the gift is not grossed up: the tax is worked out on the amount transferred. If the donor pays, the net gift is grossed up, because the tax is a further loss to the donor. On death, the donee is primarily liable for tax on a failed PET (no grossing up applies, as the donee bears the tax), and the personal representatives are liable for the estate.

The instalment option lets tax be paid in ten equal yearly instalments. It applies to certain assets: land and buildings, shares giving control of a company, a business or an interest in a business, and unquoted shares that do not give control only where further conditions are met. Those conditions include: the shares are at least 10% of the company and are worth over £20,000, or the tax on them (with other instalment property) is at least 20% of the total tax, or paying in one sum would cause undue hardship. The option is available on the death estate, on a failed PET and on additional tax on death. On a lifetime CLT, instalments are only available where the donee bears the tax. For tax that becomes payable on death, check that the asset is still held. So read the facts on who pays and what is still held. The first instalment is due at the normal due date. Instalments are not available for quoted minority holdings or cash.

Interest is charged on late tax from the due date. You use the rates given in the tax tables: 8.50% on underpaid tax and 3.50% on overpaid tax. The rules on interest on instalments are not in the tax tables, so learn them as exam-technique knowledge. On instalments of tax on land and buildings, interest runs on the whole outstanding tax. On instalments of tax on qualifying business assets and shares, the instalments are interest-free if paid on time. In the exam, say which rule applies and keep the calculation short.

Key rules to remember

Lifetime CLT due date (6 April to 30 September): Due date = 30 April following the end of the tax year; For example, a gift in July 2025 is due by 30 April 2026.
Lifetime CLT due date (1 October to 5 April): Due date = end of the sixth month after the month of the gift; A gift in November 2025 is due by 31 May 2026.
Due date on death: Due date = last day of the sixth month after the month of death; Applies to the death estate, failed PETs and additional tax on CLTs.
Instalment option: Ten equal annual instalments; the first is due at the normal due date; Only for qualifying assets. Check the conditions for the type of transfer: lifetime CLT, failed PET or death estate.
Interest rates (tax tables): Underpaid tax: 8.50%; overpaid tax: 3.50%; Interest on underpaid tax runs from the due date to the date of payment.
IHT rates (tax tables): Lifetime rate 20%; death rate 40%; nil rate band £325,000; Needed to compute the tax whose payment date you are testing.

How to solve Deferring IHT: Payment Dates, Instalments and Interest questions

Use the same order every time. It stops you mixing up lifetime and death dates.

1Identify the transfer: CLT, PET that failed, or death estate.
2Note the date of the gift or death and work out the month and tax year.
3Apply the correct due date: 30 April or six months after the month of the gift for lifetime tax; six months after the month of death for death tax.
4Decide who is liable: donor or donee for lifetime tax, donee for a failed PET, personal representatives for the estate.
5Check whether the asset qualifies for instalments and whether the other conditions for that type of transfer are met.
6If tax is paid late, compute interest at 8.50% from the due date. If overpaid, use 3.50%.
7State the cash-flow effect and any planning point, such as using instalments where the asset qualifies.

Quickest way: Date-and-asset checklist

When to use it: Use when the question asks only for payment dates or whether instalments are available.

Write the gift or death date and mark lifetime or death.
Lifetime April to September: 30 April next year. Lifetime October to March: six months after month end.
Death: six months after the month end.
Ask: is the asset land, a business, controlling shares, or unquoted shares that meet the extra conditions?
Ask: are the conditions for this type of transfer met (lifetime CLT, failed PET or death)?
Answer in one sentence for each date.

Common mistakes in Deferring IHT: Payment Dates, Instalments and Interest

Using six months from the gift date for every lifetime transfer.
Students remember the death rule and apply it to all transfers.
Fix: Check the month of the gift. April to September gifts are due on 30 April the following year.
Saying the donor is always liable for tax on a failed PET.
Students link the donor to lifetime tax.
Fix: After a PET fails on death, the donee is primarily liable. The estate is liable for tax on the estate itself.
Allowing instalments on any asset.
Students forget the list of qualifying assets.
Fix: Name the asset type before claiming instalments. Cash and quoted minority shares do not qualify.
Claiming instalments on a lifetime CLT without checking the conditions.
Students look only at the asset, or only at who pays the tax.
Fix: Check that the asset qualifies and that the other conditions in the question are met before you claim instalments.
Using the wrong interest rate.
Students use the official rate or the overpaid rate for late tax.
Fix: Use 8.50% for underpaid tax and 3.50% for overpaid tax from the tax tables.
Starting interest from the date of the gift.
Students confuse transfer date with due date.
Fix: Interest runs from the due date to the payment date.
Treating all instalments as interest-free, or all as interest-bearing.
Students forget that the asset decides the interest rule.
Fix: Instalments on land and buildings carry interest on the whole outstanding tax. Instalments on qualifying business assets and shares are interest-free if paid on time.

Worked examples

Example 1

Anil made a CLT of shares to a trust on 14 August 2025 and a second CLT on 20 December 2025. State the due dates for lifetime tax on each gift.

Show the solution

The first gift is on 14 August 2025. That falls between 6 April 2025 and 30 September 2025.
The due date is 30 April following the end of the tax year 2025/26, which is 30 April 2026.
The second gift is on 20 December 2025. That falls between 1 October 2025 and 5 April 2026.
The due date is six months after the end of December 2025, which is 30 June 2026.

Answer: First CLT: 30 April 2026. Second CLT: 30 June 2026.

Example 2

Meera died on 12 March 2026. Her estate includes a freehold property and a minority holding of quoted shares. IHT on the estate is £60,000. Of this, £40,000 relates to the freehold property and £20,000 to the quoted shares. The tax was paid in full on 31 January 2027, four months after the due date. No instalment election was made. State the due date, the interest due and whether an instalment election could have been made.

Show the solution

Death was in March 2026. Six months after the end of March is 30 September 2026. This is the due date.
No instalment election was made, so all £60,000 was due on 30 September 2026.
Tax paid on 31 January 2027 is four months after 30 September 2026. So interest runs for four months on the whole £60,000.
Interest on the underpaid £60,000 at 8.50% for four months is 60,000 × 8.50% × 4/12 = £1,700.
An election to pay the £40,000 on the freehold property by ten annual instalments could have been made, as it is land. Interest would then have run on the outstanding balance. This was not done.
The quoted minority shares do not qualify for instalments, so the £20,000 was due on 30 September 2026 in any case.

Answer: Due date 30 September 2026. Interest £1,700, being £60,000 at 8.50% for four months, because no instalment election was made and the whole tax was due on 30 September 2026. An election could have been made for the £40,000 on the freehold property, with interest on the outstanding balance, but it was not. The quoted shares do not qualify.

Exam tips

Write the due date in full, including the day and year. Marks are usually for the exact date.
Always state the asset test before saying instalments are available.
Link payment to liquidity. If an estate holds a business or land, say instalments help cash flow.
Use the tax tables for rates. Do not rely on memory for 8.50% and 3.50%.
Round interest to the nearest £ and show the working with the number of months.

Practice questions from Inheritance tax: the use of exemptions and reliefs in deferring and minimising inheritance tax liabilities

Deferring IHT: Payment Dates, Instalments and Interest in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Deferring IHT: Payment Dates, Instalments and Interest: frequently asked questions

When is inheritance tax due on a lifetime gift?

For a chargeable lifetime transfer made between 6 April and 30 September, tax is due by 30 April in the following year. For a gift between 1 October and 5 April, it is due six months after the end of the month of the gift. Tax on a failed PET is due six months after the end of the month of death.

Can I pay inheritance tax by instalments?

Yes, over ten equal annual instalments, but only on qualifying assets: land, a business, or shares giving control. Unquoted shares without control qualify only if extra conditions are met, such as being at least 10% of the company and worth over £20,000, or the tax on them being at least 20% of the total tax. It is available on the death estate, on a failed PET and on additional tax on death. On a lifetime CLT, it is only available where the donee bears the tax. Cash and quoted minority shares do not qualify.

What interest rate applies to late IHT in the ATX-UK exam?

Use 8.50% on underpaid tax and 3.50% on overpaid tax, as shown in the tax tables. Interest on underpaid tax runs from the due date to the payment date.

Who is liable to pay IHT on lifetime gifts?

The donor is normally liable for tax on a CLT, though the donee can agree to pay. If the donor pays, the gift is grossed up. If the donee pays, it is not. On a failed PET, the donee is primarily liable. The estate's personal representatives are liable for tax on the death estate.

Is interest charged on IHT instalments?

It depends on the asset. On land and buildings, interest runs on the whole outstanding tax. On qualifying business assets and shares, instalments are interest-free if paid on time. These instalment interest rules are not in the tax tables, so learn them. Late payment of any instalment is charged interest at the underpaid rate.