IHT423 Worked Example: Paying Inheritance Tax from the Deceased's Bank Account Before Probate
Form IHT423 is how an executor instructs a bank, building society or NS&I to pay inheritance tax (IHT) straight to HMRC from the deceased's own account — before probate is granted. You complete one IHT423 for each institution, write in the IHT reference number plus the exact amount that institution should transfer, and send it to that bank when you submit your IHT400. It is the standard fix for the classic chicken-and-egg problem: you can't get probate until the tax is paid, but you can't normally touch the deceased's money until you have probate.
The chicken-and-egg problem the Direct Payment Scheme solves
In England, Wales and Northern Ireland, HM Courts & Tribunals Service will not issue the grant of probate until any inheritance tax due has been paid (or arrangements to pay it are in place). But the deceased's bank usually freezes their accounts on death and won't release the cash until it sees the grant. So the money you need to pay the tax is locked behind the very document the tax payment unlocks.
The Direct Payment Scheme (DPS) breaks the loop. Under it, a participating bank, building society, or National Savings & Investments can pay tax directly to HMRC out of the deceased's frozen account, on the strength of a signed IHT423 — no grant required first. HMRC's official guidance is to "use the IHT423 with form IHT400 if you are transferring money from the deceased's bank, building society or investment account directly to HMRC using the Direct Payment Scheme" (gov.uk: IHT423; gov.uk: Direct Payment Scheme).
Two things to know up front. First, the scheme is voluntary for banks — most large UK banks and building societies take part, but you should confirm with each one. Second, IHT is generally due by the end of the sixth month after the month of death, and HMRC charges interest on anything paid late (gov.uk: Paying Inheritance Tax), so don't leave the IHT423s to the last week.
Step 1 — Get your IHT reference number first (about 3 weeks ahead)
Every IHT423 needs an Inheritance Tax reference number so HMRC can match each bank transfer to the right estate. This is not the same as the deceased's National Insurance number — it is a number you apply for specifically for the estate.
Apply online via HMRC (or by post on form IHT422 if the estate involves a trust). HMRC says you should apply "at least 3 weeks before you make a payment." Because the IHT400 and the IHT423s are submitted together with the payment, that means starting the reference-number application roughly three weeks before you intend to file the IHT400. Get this wrong and the whole chain stalls — the banks have nothing to quote on the transfer.
Worked Example
The Whitcombe estate. Margaret Whitcombe died on 12 January 2026 leaving a taxable estate. After deducting her nil-rate band, the IHT400 calculation shows £80,000 of inheritance tax due. Her son James is the sole executor. The money is spread across three institutions, none of which will release funds before probate:
| Institution | Account | Available balance |
|---|---|---|
| Barclays | Current account | £42,000 |
| Nationwide BS | Savings (instant access) | £25,000 |
| NS&I | Direct Saver | £60,000 |
James applies for the estate's IHT reference number on 2 March 2026, intending to file the IHT400 around 23 March. He decides how much each institution should send so the £80,000 is covered:
| Institution | IHT423 sent? | Amount to transfer to HMRC |
|---|---|---|
| Barclays | Yes — form 1 | £40,000 |
| Nationwide BS | Yes — form 2 | £20,000 |
| NS&I | Yes — form 3 | £20,000 |
| Total | £80,000 |
He deliberately leaves a cushion in each account (e.g. £2,000 at Barclays) for direct debits and funeral costs, and spreads the bill so no single account is drained. Three separate IHT423 forms go out — one to each institution — each quoting the same IHT reference number but a different transfer amount. HMRC receives three payments totalling exactly £80,000, all tagged to the Whitcombe estate.
Step 2 — One IHT423 per institution: which boxes to complete
This is the part people get wrong. You do not list all the banks on one form. You complete a separate IHT423 for every institution you're drawing on, and each form carries that institution's own figure. In the Whitcombe example that's three forms.
On each IHT423, you complete:
| Section on the form | What goes in it |
|---|---|
| Inheritance Tax reference number | The estate's IHT reference (Step 1). Identical on all three forms — it's how HMRC links the payments. |
| Deceased's details | Full name, last address and date of death — so the bank can match the account to the right customer. |
| The account to draw from | The name of the bank/building society, the sort code and the account number held in the deceased's name at that institution. |
| Amount to be transferred to HMRC | The figure for this institution only (e.g. £40,000 on the Barclays form). HMRC's form asks for the amount in figures, and many estate practitioners also write it in words to avoid a misread. |
| Personal representative's signature | Each executor/administrator named on the IHT400 signs each form, authorising the transfer. |
Send the completed IHT423 to the bank or building society itself (not to HMRC) — typically to its bereavement or probate team — at the same time you submit the IHT400 to HMRC. The institution then pays its stated amount directly to HMRC. Keep a copy of every form.
Step 3 — Cover the balance: NS&I, ISAs and the instalment option
The DPS reaches bank, building society, NS&I and many investment accounts — but it won't cover everything, and sometimes the liquid cash simply isn't enough.
National Savings & Investments and ISAs
NS&I products (Premium Bonds, Direct Saver, Income Bonds and the like) can usually be paid out under the DPS via an IHT423, exactly as in the Whitcombe example. Cash held in the deceased's ISAs can also be a source — note that on death an ISA becomes a "continuing account of a deceased investor" and the surviving spouse may inherit an Additional Permitted Subscription allowance, so check the ISA position before draining it.
The 10-year instalment option for property and business assets
If most of the estate's value is tied up in a house, land, a controlling shareholding or qualifying business assets — things you can't sell overnight — you can elect on the IHT400 to pay the tax attributable to those assets in 10 equal yearly instalments rather than all at once (gov.uk: yearly instalments).
| Feature | Detail |
|---|---|
| Number of payments | 10 equal annual instalments |
| First instalment due | End of the sixth month after death (then yearly on that date) |
| Qualifying assets | Land and buildings; shares giving control of a company; some unlisted shares; businesses run for profit; qualifying business/agricultural assets |
| Interest | Generally charged on the outstanding balance; no interest on the first instalment unless paid late. Sell the asset and the remaining tax becomes payable in full. |
Note: HMRC's instalment-interest rules for assets qualifying for Agricultural Relief or Business Relief changed from 6 April 2026 — verify the current position on the gov.uk page before relying on it. The standard IHT rate remains 40% above the £325,000 nil-rate band (up to £500,000 where the residence nil-rate band applies), per gov.uk: Inheritance Tax.
In the Whitcombe example, the £80,000 was fully covered by liquid accounts via three IHT423s, so no instalment election was needed. Had Margaret's estate been mostly her house, James could have paid the tax on the cash/investments via the DPS now and elected to pay the house's share of the tax over 10 years.
Quick checklist
| # | Do this |
|---|---|
| 1 | Confirm each bank/building society/NS&I takes part in the Direct Payment Scheme. |
| 2 | Apply for the estate's IHT reference number at least 3 weeks before you pay. |
| 3 | Finish the IHT400 so you know the total tax due. |
| 4 | Decide how much each institution will transfer; the amounts must sum to the tax due (less any you're paying another way). |
| 5 | Complete one IHT423 per institution — same reference number, different amount and account on each. |
| 6 | Send each IHT423 to that institution; submit the IHT400 to HMRC at the same time. |
| 7 | For property/business assets, consider electing the 10-year instalment option on the IHT400. |
Frequently asked questions
Do I send the IHT423 to HMRC or to the bank?
Send each completed IHT423 to the bank, building society or NS&I that holds the account — usually its bereavement/probate team — not to HMRC. The institution then transfers the stated amount directly to HMRC. You submit the IHT400 itself to HMRC at the same time.
How many IHT423 forms do I need?
One per institution you're drawing money from. If the tax is being paid from three different banks, you complete three separate IHT423s, each quoting the same Inheritance Tax reference number but its own account details and transfer amount.
Where do I get the Inheritance Tax reference number?
Apply through HMRC's online service (or form IHT422 by post if a trust is involved). HMRC says to apply at least 3 weeks before you make a payment, so start it about three weeks before you plan to file the IHT400. See gov.uk.
What if the bank accounts don't hold enough to cover the bill?
Top up from NS&I or ISA cash (also payable under the Direct Payment Scheme via IHT423), or — for tax on property, land, a controlling shareholding or qualifying business assets — elect on the IHT400 to pay that portion in 10 yearly instalments. Interest usually applies to the outstanding balance.
Can I use the Direct Payment Scheme without probate?
Yes — that is the whole point. The scheme lets participating institutions pay the tax before the grant of probate is issued, which is necessary because HMRC must be paid before HMCTS will issue the grant.
When is the inheritance tax due?
By the end of the sixth month after the month in which the person died. HMRC charges interest on tax paid after that date, so plan the reference number and IHT423s well ahead. See gov.uk: Paying Inheritance Tax.
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End of the 6th month after death; interest accrues after that.
Separate IHT423 for each institution, all sharing one IHT reference number.
General information, not personal United Kingdom tax/legal advice. Verify with a qualified professional.
Sources: gov.uk — IHT423, gov.uk — Direct Payment Scheme, gov.uk — get a reference number, gov.uk — yearly instalments, gov.uk — Inheritance Tax. Figures verified against gov.uk on 2026-06-03.