Comparison · Estate Planning · 2026
IHT Direct Payment Scheme vs Probate Loan UK 2026: Paying IHT Before Probate
Inheritance tax often has to be paid before probate is granted, but the estate's own assets are usually frozen until probate is issued. The Direct Payment Scheme and probate loans are the two main ways executors bridge that gap. This guide compares both for 2026.
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TL;DR - 30-Second Summary
- - Direct Payment Scheme: free, pays IHT from the deceased's own bank accounts direct to HMRC before probate
- - Probate loan: borrowing secured against the estate, used when DPS funds are insufficient
- - IHT is due 6 months after the month of death; interest accrues on late payment
- - Instalment payments over up to 10 years are available for property-heavy estates
Side by Side
| Feature | Direct Payment Scheme | Probate Loan |
|---|---|---|
| Cost | Free | Interest & fees apply |
| Funding source | Deceased's own bank accounts | External lender |
| Coverage | Limited to participating banks' balances | Can cover full bill regardless of cash held |
| Best suited to | Cash-heavy estates | Property-heavy estates with little cash |
Verdict
Use the Direct Payment Scheme first wherever possible — it is free and simply applies the deceased's own money to their own tax bill. Only turn to a probate loan, the HMRC instalment option, or a family loan if the DPS-eligible balances do not cover the full inheritance tax bill, most commonly when the estate is dominated by property rather than cash. Speak to the solicitor or probate professional handling the estate early, as the six-month payment deadline runs regardless of how quickly probate itself is granted.
Frequently Asked Questions
Why do executors sometimes need to pay inheritance tax before probate is granted?
HMRC generally requires any inheritance tax due to be paid, or arrangements made to pay it, before the Probate Registry will issue the grant of probate that gives executors legal authority to access most of the deceased's assets. This creates a cash-flow problem — the money to pay the tax is often locked inside the very accounts and property that cannot yet be accessed.
What is the Direct Payment Scheme (DPS)?
The Direct Payment Scheme lets executors instruct participating banks and building societies to pay inheritance tax directly to HMRC from the deceased's own account, before probate is granted. This avoids the executor needing to find the money elsewhere, but it only works for funds actually held in accounts with banks that participate in the scheme, and only up to the balance available in those accounts.
What is a probate loan and when is it needed?
A probate (or bridging) loan is borrowing arranged by an executor or beneficiary, secured against the expected inheritance or the estate's property, used to pay inheritance tax (or other estate costs) when the Direct Payment Scheme is not available or does not cover the full amount — for example, when the estate is mostly property and has little cash, or when the deceased's bank does not participate in the DPS.
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When does interest start accruing on unpaid inheritance tax?
Inheritance tax is normally due six months after the end of the month in which the person died. If it is not paid by then, HMRC charges interest on the outstanding amount from that date, even if probate has not yet been granted and the estate's assets remain inaccessible. This is one reason executors often use the Direct Payment Scheme or a probate loan rather than simply waiting for probate to release funds.
Can inheritance tax on property be paid in instalments instead?
Yes — HMRC's instalment option allows inheritance tax attributable to certain assets, most commonly land and property, to be paid in equal annual instalments over up to 10 years, rather than as a single lump sum before probate. Interest is charged on the outstanding balance for instalments relating to most assets (though not usually for a share used as the deceased's main home in some cases), so this is often used alongside, not instead of, other funding routes.
Which route is cheaper, DPS or a probate loan?
The Direct Payment Scheme is effectively free — you are simply using the deceased's own money to pay their own tax bill, with no borrowing cost. A probate loan is a form of secured borrowing and carries interest and arrangement fees, so it is generally more expensive, but is often the only option when there is insufficient cash in participating bank accounts to cover the bill through the DPS alone.
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Disclaimer: This comparison is general educational information and not legal or tax advice. Estate administration rules and HMRC processes are case-specific. Refer to gov.uk/paying-inheritance-tax and consider advice from a probate solicitor.