IHT423 Direct Payment Scheme: Paying Inheritance Tax Before Probate

The single most stressful moment for many executors in England is not filling in the forms. It is discovering the catch-22: inheritance tax must be paid to HMRC before probate is issued, but the funds to pay the tax are locked inside accounts the bank will not release until probate is issued.

Form IHT423 is the legal solution to this problem. Here is how it works.

The Liquidity Trap

Inheritance tax, when it is due, must be paid — or a formal instalment arrangement confirmed — by the end of the sixth month after the date of death. HMRC begins charging daily interest after that deadline. In mid-2026, that interest rate is 7.75% per annum on the outstanding balance.

The problem is sequencing. HMCTS will not issue the Grant of Probate until HMRC has processed the tax return. HMRC's processing takes time — particularly for IHT400 submissions. And the banks will not release the deceased's funds to the executor without the Grant of Probate.

So the executor needs probate to get the money, needs the money to pay the tax, and needs the tax paid to get the probate. Left unresolved, this loop triggers the interest charges and can push the estate into the next billing period.

Form IHT423 is the bypass.

What IHT423 Does

The Direct Payment Scheme (IHT423) allows participating banks and building societies to pay inheritance tax directly to HMRC from the deceased's accounts — without waiting for the Grant of Probate to be issued.

The payment is made before probate, and before the executor has legal authority to access the accounts. This is the only mechanism in English law that allows frozen funds to be released directly for tax payment prior to the grant.

It is not a loan, not a bridging arrangement, and not something the executor pays first and claims back. The bank transfers the funds directly from the deceased's account to HMRC's bank account, using the details provided on the IHT423 form.

Which Institutions Participate

The Direct Payment Scheme is operated by HMRC in conjunction with participating banks and building societies. Participation is voluntary, but most major institutions in England are registered, including:

• Barclays
• Lloyds Bank, Halifax, Bank of Scotland
• NatWest, Royal Bank of Scotland
• Santander
• HSBC
• Nationwide Building Society

NS&I (National Savings and Investments) does not participate in the standard Direct Payment Scheme, though it has its own separate process for releasing funds to pay inheritance tax.

If the deceased's main accounts are at a non-participating institution, the executor will need to arrange alternative financing — typically a short-term personal loan or family bridge — to cover the tax while probate is being processed.

Before relying on the scheme, confirm with the specific institution that it currently participates, as participation can change.

How to Use Form IHT423

The IHT423 is submitted alongside the main IHT400 inheritance tax return, not as a standalone document. The sequence is:

Step 1: Complete the IHT400. The main inheritance tax return must be fully prepared with all applicable schedules (IHT405 for property, IHT406 for bank accounts, etc.) before you can calculate the tax due.

Step 2: Calculate the inheritance tax. Work out the total tax payable — or the amount due by the six-month deadline if you are opting for the instalment arrangement.

Step 3: Complete Form IHT423. One IHT423 form is completed per financial institution from which you want to draw funds. The form includes:

• The institution's name and sort code
• The account number(s) from which funds are to be drawn
• The amount to be transferred
• The HMRC bank account details for the payment (printed on the form)
• The executor's signature(s)

Step 4: Send the IHT423 directly to the bank. Critically, the IHT423 goes to the bank — not to HMRC. Send the signed form to the institution's bereavement team along with the certified death certificate and any other documentation they require. Each bank has its own list of supporting documents.

Step 5: The bank confirms and transfers. Once the bank verifies the documentation, it transfers the specified amount directly to HMRC. This typically takes 5–10 working days, though timescales vary by institution.

Step 6: Submit the IHT400 to HMRC. You should submit the IHT400 to HMRC once you have arranged for the bank transfer via IHT423. HMRC will acknowledge receipt, and you must then wait exactly 20 working days before submitting the probate application to HMCTS.

What Happens to the Bank Account After Payment

The IHT423 payment releases only the amount specified for tax. The remainder of the account stays frozen until probate is granted. Once the executor has the sealed Grant of Probate, they can return to the bank with it and request full release of the remaining funds.

This means the bank account is partially accessed twice: once to pay the inheritance tax, and once after probate to distribute the remaining balance.

Using IHT423 for Funeral Costs

A related mechanism — separate from IHT423 — allows banks to release funds directly to a funeral director before probate. Most high-street banks will pay the funeral director's invoice directly from the deceased's account upon presentation of the death certificate and a copy of the invoice. This does not require any HMRC form.

Form IHT423 is specifically for inheritance tax payment to HMRC. If you need to pay funeral expenses from frozen accounts, contact the bank's bereavement team directly and ask about their process for releasing funds to a funeral director.

When IHT423 Is Not Available

If no accounts at participating institutions hold sufficient funds to cover the inheritance tax due, the executor has three alternatives:

Instalment arrangement: For certain assets — primarily property and unlisted company shares — HMRC permits the inheritance tax to be paid in ten equal annual instalments. Interest applies to outstanding instalments. This keeps the tax position open for years, but it avoids the immediate cash flow crisis.

Personal loan or bridge finance: Some executors borrow funds personally or through a short-term finance arrangement to pay the tax, then repay the loan once probate is granted and the estate is released. This incurs interest, but that interest is generally deductible as an estate expense.

Negotiate with HMRC: In cases of genuine hardship or unusual circumstances, HMRC can be contacted directly to discuss payment timing. HMRC is not inflexible when there is a documented liquidity problem rather than avoidance.

The England Probate Process Guide includes a step-by-step walkthrough of the IHT423 process, the bank submission requirements for major institutions, and the instalment arrangement criteria for property-heavy estates where the cash is tied up in bricks.

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