The government’s refusal to relax the inheritance tax (IHT) payment deadline has delivered a stark warning to families: the system is becoming tougher, more complex and more expensive to navigate and advance planning is no longer optional.
From next April, pensions will increasingly fall within the scope of inheritance tax, dragging many more estates into the IHT net. Yet despite the looming changes, the Treasury has confirmed it will not extend the long‑standing six‑month deadline for paying IHT after death. For executors and bereaved families, that decision could have serious financial consequences.
Six months sounds reasonable until real life gets in the way
In simple terms, inheritance tax must be paid within six months of the end of the month in which someone passes away. Miss that deadline and interest immediately start to build.
That interest rate isn’t trivial. It’s charged at 4% above the Bank of England base rate, which currently puts it at 7.75% and with rates expected to rise further this year, late payment is only going to get more expensive.
For families already coping with bereavement, paperwork and practical decisions, that ticking clock can quickly become an added source of pressure and cost.
Why pensions change everything
The biggest shift on the horizon is pensions.
Until now, pensions have often been a relatively smooth part of estate planning, sitting largely outside the inheritance tax net. That’s changing. From next April, pensions will increasingly be counted as part of an estate for IHT purposes meaning many more families will face both higher tax bills and more complex administration.
For executors, that can mean:
- Tracking down multiple pension pots
- Waiting for pension providers to confirm accurate values at the date of death
- Deciding where the tax should be paid from the estate, the pension, or the beneficiary
- Coordinating all of this within a strict six‑month deadline
It’s easy to see how delays can arise, even when everyone is doing their best.
Executors are caught in the middle
Executors, very often family members, are legally responsible for making sure inheritance tax is paid on time. The problem is that many estates are asset‑rich but cash‑poor.
Money to pay taxes is usually tied up until Probate is granted yet HMRC still expects payment on time. While instalment options exist in some cases, the first payment of IHT must still be made within six months, and interest continues to run on anything unpaid.
Without a clear funding plan, families may be forced into short‑term borrowing or accept hefty interest charges that chip away at the value of the estate.
The real takeaway: plan early and plan for cashflow
The government’s refusal to budge on deadlines sends a strong signal. Inheritance tax is not just about how much you pay, but when and how you pay it.
With pensions soon falling into the IHT net, early planning is key. That means:
- Reviewing your estate with the new pension rules in mind
- Understanding where a future IHT bill might come from
- Making sure the family has enough liquidity to pay tax on time
- Considering tools such as life cover written in trust to help fund IHT when it’s due
The sooner these conversations happen, the more options families tend to have.
HaysMac Support
HaysMac’s Private Client Tax team are on hand to help. Our tax experts understand that this is a delicate topic, what we offer is the ability to alleviate some of the additional stress that comes with matters of the estate during what will no doubt be an extremely difficult time. With proper, thought through planning we can help make sure you and your family are in the best position possible.
If you want to put a face to a name and meet the team who will have your back. Reach out to us on the details attached, and let’s have an introductory call to discuss your situation.
