Inheritance Tax Account: Deadlines, IHT400, and Penalties

An inheritance tax account is the formal return — form IHT400 — that you file with HM Revenue and Customs to declare a deceased person’s estate, the tax owed on it, and any reliefs you’re claiming. You need one when the estate does not qualify as “excepted,” which broadly means it owes inheritance tax or falls outside a set of simplified categories. If it is excepted, you skip the IHT400 entirely and report the value through your probate application instead. For everyone else, the account has to be filed within 12 months of death, and any tax owed has to be paid within six.

Do You Actually Need to File One

Check first whether the estate is excepted. If it is, the full account isn’t required. An estate usually counts as excepted if any of the following apply:1GOV.UK. How to Value an Estate for Inheritance Tax and Report Its Value – Check Type of Estate

  • The estate’s total value is under £325,000 (the nil rate band).
  • The estate is worth £650,000 or less and unused nil rate band is being transferred from a spouse or civil partner who died first.
  • Everything was left to a UK-resident spouse, civil partner, or qualifying charity, and the estate is worth less than £3 million.
  • The deceased lived permanently outside the UK and their UK assets are worth £150,000 or less.

If none of those fit, you need the full inheritance tax account.2GOV.UK. Inheritance Tax Account IHT400 Above the £325,000 threshold, tax is charged at 40%. An additional residence nil rate band of up to £175,000 applies when the home passes to direct descendants, and together the two allowances can shelter up to £500,000 for a single person, or £1 million for a married couple where both thresholds are transferred.3GOV.UK. Inheritance Tax Nil-Rate Band and Residence Nil-Rate Band Thresholds From 6 April 2026

The Two Deadlines to Put in Your Diary

Inheritance tax runs on two clocks, and they don’t match:

The gap between the two is intentional. You pay based on your best estimate at six months, even if you haven’t finished valuing complex assets, and the IHT400 you file later provides the precise breakdown. If you overpay, HMRC refunds the difference with interest at 2.75%. If you underpay, you owe the balance plus late payment interest on the shortfall.

Getting Your Reference Number First

Before you can pay anything or file the IHT400, you need a unique inheritance tax reference number from HMRC. Apply using form IHT422, and do it at least three weeks before you plan to make a payment.6GOV.UK. Pay Your Inheritance Tax Bill – Get a Payment Reference Number Applying early gives you room to move; leaving it to the last week before the six-month payment deadline is a common and avoidable mistake.

The form asks for the deceased’s full name and any other names they used, date of birth, date of death, and National Insurance number, along with the names, addresses, and contact details for all executors or administrators. It also asks for an estimate of the estate’s value.7GOV.UK. Application for an Inheritance Tax Reference IHT422 Get the National Insurance number right: HMRC uses it to link the estate to the deceased’s lifetime tax records, and a mismatch flags the application for manual review. If you can’t find it, check old tax correspondence, P60s, or the deceased’s personal tax account.

You can apply online or by post. The online route is generally faster but isn’t available if the tax relates to a trust — for that, use form IHT122 and apply by post.8GOV.UK. Inheritance Tax – Payment Enquiries

Filling In the IHT400

Once you have the reference number, the IHT400 is where you declare everything: assets, debts, lifetime gifts, and any reliefs or exemptions you claim. It’s an interactive PDF that you complete on screen using Adobe Reader, then print and post to HMRC.2GOV.UK. Inheritance Tax Account IHT400

Alongside the IHT400, submit form IHT421, which HMRC uses to communicate with the probate registry. For probate applications in England and Wales, HMRC will provide a unique code that you then enter on your probate application. The IHT400 is also where you elect to pay in yearly instalments if you qualify. Take your time on this form. Errors trigger penalties, and significant undervaluations invite scrutiny that can delay the entire estate administration.

Paying the Tax

Every payment to HMRC has to include your inheritance tax reference number. Without it, the payment sits unallocated, HMRC won’t confirm the liability is met, and your probate application is blocked. Check the reference before you send the transfer.

Bank Transfer

You can pay by Faster Payments, CHAPS, or Bacs from an online bank account or by phoning your bank. HMRC’s inheritance tax account details are sort code 25 61 21 and account number 63495590.9GOV.UK. Pay Your Inheritance Tax Bill – At Your Bank or Building Society Faster Payments usually arrive the same or next day, CHAPS the same working day if made within your bank’s cut-off, and Bacs takes about three working days.10GOV.UK. Pay Your Inheritance Tax Bill – Make an Online or Telephone Banking Transfer Close to a deadline, use Faster Payments or CHAPS.

The Direct Payment Scheme

Here is the catch-22 many executors hit: the tax often needs to be paid before probate is granted, but you can’t access the deceased’s bank accounts without probate. The Direct Payment Scheme solves it. Using form IHT423, you instruct the deceased’s bank, building society, or National Savings and Investments account to transfer funds directly to HMRC.11GOV.UK. Direct Payment Schemes for Inheritance Tax IHT423

You need a separate IHT423 for each institution holding the deceased’s money. The scheme covers the tax and any accrued interest, but not the probate application fee, which you’ll pay from your own funds or other accessible money. Not every institution processes these quickly, so contact the bank early to confirm they will handle it.

Paying in Yearly Instalments

Some assets are valuable on paper but hard to turn into cash: a family home you want to keep, a business, farmland. For qualifying assets, HMRC allows the tax to be spread over 10 equal annual payments, elected on form IHT400 when you file it.12GOV.UK. Pay Your Inheritance Tax Bill – In Yearly Instalments

Assets that qualify include:

  • Property the executor or beneficiary decides to keep rather than sell.
  • Shares that gave the deceased control of more than 50% of a company.
  • Unlisted shares worth over £20,000 that represent at least 10% of the company’s shares by nominal value.
  • A business run for profit, based on the net value of the business as a whole.
  • Agricultural land and property, though in practice agricultural relief usually eliminates the tax.

You can also pay in instalments if at least 20% of the estate’s total inheritance tax bill falls on qualifying assets, or if paying in one lump sum would cause financial hardship. Interest runs on the unpaid balance during the instalment period, currently at 7.75%.13GOV.UK. Rates and Allowances – Inheritance Tax Thresholds and Interest Rates Sell the asset before the 10 years are up and the remaining tax becomes due immediately.

What Late or Wrong Costs You

Miss the six-month payment deadline and interest starts running immediately on the outstanding balance. The current late payment rate is 7.75%, set from 9 January 2026.13GOV.UK. Rates and Allowances – Inheritance Tax Thresholds and Interest Rates On a £200,000 tax bill, that is roughly £15,500 a year in interest, taken straight out of what the beneficiaries would otherwise receive.

Filing Late

File the IHT400 more than 12 months after death and HMRC imposes a fixed £200 penalty plus a monthly surcharge that scales with the tax liability:14GOV.UK. IHTM36023 – Late Accounts – Penalties Chargeable

  • Tax under £5,000: £10 per month (or part month), up to £3,000.
  • Tax between £5,000 and £50,000: £50 per month, up to £3,000.
  • Tax between £50,000 and £100,000: £100 per month, up to £3,000.
  • Tax between £100,000 and £1 million: £200 per month, up to £3,000.
  • Tax over £1 million: £400 per month, up to £3,000.

If HMRC has to chase you rather than receiving the return voluntarily, the initial penalty jumps to £1,200. Penalties are separate from interest charges; you pay both. A reasonable excuse defence exists, but HMRC interprets it narrowly.

Getting Things Wrong

Errors on the IHT400 carry their own penalty regime, depending on whether HMRC considers the mistake careless or intentional:15GOV.UK. Penalties – An Overview for Agents and Advisers

  • Lack of reasonable care: 0% to 30% of the extra tax due.
  • Deliberate error: 20% to 70% of the extra tax due.
  • Deliberate and concealed: 30% to 100% of the extra tax due.

HMRC can reduce these percentages if you come forward voluntarily, help calculate the correct tax, and give access to verify the figures. If you spot an error after filing, correct it promptly rather than hope it goes unnoticed.

Correcting the Account After Filing

Values shift, overlooked items surface, and property valuations come in differently than expected. To correct an IHT400 already filed, use form C4, the corrective account.16GOV.UK. Inheritance Tax – Corrective Account It applies whether you’ve paid too much or too little. Complete it on screen, print, and post to HMRC. A continuation sheet, form C4(C), is available if you need more space. Filing a correction promptly — particularly when you’ve underpaid — reduces the interest that accrues and shows HMRC good faith, which matters if penalty questions come up later.