When the second parent dies, inheritance tax is legally paid by the estate before assets are distributed to beneficiaries, meaning the executor or administrator must calculate, report and pay any tax due to HMRC within six months of death, effectively reducing the inheritance that beneficiaries ultimately receive.
According to recent data from the Resolution Foundation, only 3.7% of UK deaths (approximately 27,000 estates) resulted in an inheritance tax charge in 2020-21. IHT receipts totalled £7.1 billion in 2022-23, representing less than 1% of total tax revenue, though this figure is projected to rise significantly to £9.7 billion by 2028-29 as frozen thresholds pull more estates into the tax net.
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Who Pays Inheritance Tax When Second Parent Dies?
The death of a second parent often triggers inheritance tax considerations that weren’t relevant when the first parent passed away. This is because when the first parent died, their estate likely passed to the surviving spouse completely tax-free under the spousal exemption. However, when the second parent dies, the combined wealth often exceeds tax-free thresholds, creating potential tax liabilities.
The good news is that any unused portion of the first parent’s tax-free allowances can be transferred to the second parent’s estate. This includes both the standard Nil-Rate Band (NRB) of £325,000 and potentially the Residence Nil-Rate Band (RNRB) of up to £175,000 if a home is being passed to direct descendants. Combined, these transferred allowances can provide up to £1 million in tax-free inheritance for married couples or civil partners.
Understanding how these allowances work is crucial for minimising the tax burden on your inheritance. Many families miss opportunities to claim these transferred allowances simply due to lack of knowledge or proper documentation.
Who pays the inheritance tax in the UK?
In the UK, inheritance tax is paid by the executor of the will or the administrator of the estate, not by the beneficiaries directly. The executor or administrator has the legal responsibility to calculate, report and pay any inheritance tax due from the assets of the deceased person’s estate before distributing what remains to the beneficiaries. If there’s a will in place, it’s the named executor who handles this task, whilst if someone dies without a will (intestate), the appointed administrator takes on this responsibility.
Most inheritance tax is typically paid through the Direct Payment Scheme (DPS), which allows the executor or administrator to request that the tax be paid directly from the deceased person’s bank or building society accounts. This practical approach helps streamline the process during what is often an emotionally difficult time for families. In some cases, the deceased may have planned ahead by setting up a whole-of-life insurance policy specifically to cover potential inheritance tax liabilities, especially if they knew their estate would exceed the tax-free threshold.
It’s worth noting that although the executor or administrator arranges the payment, the tax ultimately reduces the value of the estate available to beneficiaries, so in an indirect sense, the beneficiaries bear the financial impact. The tax must be paid by the end of the sixth month following the person’s death to avoid interest charges being applied.
Inheritance tax is currently charged at 40% on the value of an estate above the threshold of £325,000 (also known as the nil-rate band), which has remained unchanged since 2010-11 and is now fixed until 2030. However, there are important exemptions and additional allowances, such as transfers between spouses or civil partners which are exempt, and the residence nil-rate band which provides an additional allowance when leaving your home to direct descendants.
Only about 1 in 20 estates in the UK actually pay inheritance tax, as many estates fall below the threshold or qualify for exemptions. If you’re concerned about inheritance tax on your estate or one you’re responsible for managing, seeking professional advice can help navigate the complexities of this tax effectively. As a cash house buyer, Property Saviour often works with executors who need to sell inherited property quickly to settle inheritance tax obligations within the required timeframe. If you find yourself needing to sell an inherited house swiftly to meet tax payments, getting in touch with experts who understand these sensitive situations can make all the difference.
This tax system is designed not just to generate revenue for public services, but also to prevent excessive accumulation of wealth in families over generations. The funds collected through inheritance tax-about £8 billion annually-contribute to government spending on essential services across Britain. Understanding who’s responsible for paying this tax is crucial for anyone involved in estate planning or acting as an executor, helping to ensure that all legal obligations are met properly during the probate process.
Who Pays Tax on Inheritance After the Second Parent’s Death?
While the legal responsibility for calculating, reporting and paying inheritance tax falls on the executor or administrator of the estate, the financial burden ultimately falls on the beneficiaries who receive less inheritance as a result of the tax payment. In essence, the tax reduces the estate’s value before distribution occurs.
This distinction is important because it means beneficiaries don’t typically receive a separate tax bill. Instead, inheritance tax is settled from the estate’s assets before distribution takes place. This can create practical challenges, as the tax must be paid before the grant of probate is issued-which is often needed to access the deceased’s assets.
The executor faces several immediate responsibilities:
Value the entire estate accurately
Apply any available tax-free allowances and exemptions
Calculate any tax due on the remaining amount
Submit the appropriate tax forms to HMRC
Arrange payment within six months of death
Distribute remaining assets according to the will
Olivia from Doncaster experienced these challenges after her mother passed away five years after her father. “The family home and investments were worth about £800,000, and we needed to pay nearly £60,000 in inheritance tax before we could even access Mum’s accounts,” she explains. “Finding that money upfront while also dealing with our grief was incredibly stressful.” Property Saviour helped Olivia by offering a guaranteed purchase on the family home, providing the funds needed to pay the inheritance tax and giving her certainty during an emotionally difficult time.
How Is Inheritance Tax Calculated When the Second Parent Dies?
Understanding the calculation of inheritance tax after the second parent’s death helps beneficiaries prepare for potential tax liabilities. The calculation involves several steps and potential allowances.
The following table outlines the key thresholds and allowances that apply when calculating inheritance tax after the second parent dies:
| Allowance | Amount (2025) | Transferable? | Conditions |
|---|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | Yes | Unused portion from first parent can transfer |
| Residence Nil-Rate Band (RNRB) | £175,000 | Yes | Only applies to home left to direct descendants |
| Spousal Exemption | Unlimited | N/A | No longer applies after second death |
| Charity Exemption | Unlimited | N/A | No tax on assets left to qualifying charities |
| Business Relief | 50% or 100% | No | Applies to qualifying business assets |
| Agricultural Relief | 50% or 100% | No | Applies to qualifying agricultural property |
This table highlights the significant potential tax savings available through proper planning. For example, a married couple can potentially pass on up to £1 million tax-free (£650,000 in combined NRBs plus £350,000 in combined RNRBs) if they own a home that passes to their children or grandchildren. Without these transferred allowances, the tax-free amount would be just £325,000, potentially resulting in hundreds of thousands in additional tax.
Remember that claiming these transferred allowances isn’t automatic-the executor must submit the appropriate documentation to HMRC proving the unused allowances from the first parent’s estate.
When Must Inheritance Tax Be Paid After the Second Parent Dies?
Inheritance tax creates a challenging timeline for many families because it must typically be paid within six months of the death of the second parent. This creates a potential cash flow problem since the tax often needs to be paid before the grant of probate is issued, which is usually required to access and distribute the estate’s assets.
This timing challenge is a significant source of stress for many executors and beneficiaries. Common approaches to handling this include:
Using the HMRC Direct Payment Scheme to allow banks to release funds specifically for tax payment
Paying in instalments over 10 years if the tax relates primarily to property (though interest applies)
Executors or beneficiaries temporarily paying from personal funds
Taking out a loan against estate assets
Selling property quickly to release necessary funds
Based on our experience, many families find themselves caught in this difficult situation, especially when the estate is property-rich but cash-poor. One common solution mentioned is to arrange a quick property sale specifically to cover tax liabilities, avoiding the lengthy traditional sales process through estate agents.
At Property Saviour, we understand the pressure this creates during an already difficult time. Our team specialises in providing rapid property purchases with guaranteed completion dates, ensuring executors have the funds needed to pay inheritance tax within the required timeframe. If you’re facing inheritance tax obligations and need certainty about selling an inherited property, our compassionate approach can provide peace of mind when you need it most.
Tenants in Common to Avoid Inheritance Tax: Does It Work?
Using a “tenants in common” ownership arrangement instead of “joint tenants” can be part of an effective inheritance tax planning strategy, though it doesn’t eliminate tax liability on its own. When property is owned as tenants in common, each owner has a distinct share that can be passed according to their will, rather than automatically going to the surviving owner.
This distinction allows for more flexible estate planning. For example, when the first parent dies, they could leave part of their share to children (using their nil-rate band) rather than everything automatically passing to the surviving spouse. This prevents “wasting” the first parent’s tax-free allowance.
However, this approach requires careful planning and appropriate will provisions to be effective. Simply changing to tenants in common without additional planning won’t reduce the overall inheritance tax burden. The strategy often works best when combined with:
Trust arrangements in wills
Lifetime gifting strategies
Use of applicable reliefs (business, agricultural)
Potential use of insurance policies to cover tax liabilities
Remember that any tax planning strategy should be implemented with professional advice to ensure it meets your specific circumstances and complies with current tax laws.
How to Reduce Inheritance Tax When the Second Parent Dies
Reducing the inheritance tax burden after the second parent’s death requires advance planning. Here are effective strategies that can help minimise the tax impact:
Lifetime gifting: Gifts made more than seven years before death are exempt from inheritance tax
Charity bequests: Leaving at least 10% of the estate to charity reduces the tax rate from 40% to 36%
Insurance planning: Life insurance policies written in trust can provide funds to pay tax without increasing the taxable estate
Business or agricultural assets: These may qualify for relief of up to 100%
Residence nil-rate band: Ensure the family home passes to direct descendants to utilize this additional allowance
Pension planning: Pensions can often be passed on outside the estate with favorable tax treatment
Regular gifts from income: Regular gifts that don’t reduce standard of living may be exempt
These strategies are most effective when implemented as part of a comprehensive estate plan well before death. Last-minute planning often has limited impact on the inheritance tax position.
What Happens If You Can’t Pay Inheritance Tax?
If you’re unable to pay inheritance tax when due, it’s crucial to contact HMRC immediately rather than ignoring the situation. HMRC may allow payment in installments over 10 years for the portion of tax attributable to property or certain business assets, though interest will still accrue.
Failing to pay or arrange payment plans can result in:
Interest charges (currently 7.75% as of May 2025)
Potential penalties for late payment
Delay in receiving the grant of probate
Legal action to recover the debt
Personal liability for executors in some circumstances
The key is to be proactive. HMRC is generally willing to work with taxpayers who demonstrate good faith efforts to meet their obligations. Documenting your communication with HMRC and any payment arrangements is essential for executors to demonstrate they’ve fulfilled their duties.
If selling assets becomes necessary, prioritize those that can be liquidated quickly without significant loss of value. Property often represents the largest asset but can take time to sell through traditional channels-which is why many executors facing tax deadlines turn to property buying companies for faster, guaranteed completions.
Can Inheritance Tax Be Paid in Installments?
Yes, inheritance tax related to certain assets can be paid in installments over up to 10 years. This option primarily applies to:
Property (including land, buildings, and business premises)
Certain business assets
Agricultural property
Timber
Heritage assets (in some cases)
To qualify for installment payments, the asset must make up more than 50% of the tax bill. Payments are typically made in 10 equal yearly installments, with the first payment due six months after the death.
While this arrangement provides welcome breathing space, it’s important to note that interest (currently 7.75% as of May 2025) is charged on the outstanding amount. This means the total tax paid will be significantly higher if using the installment option.
Many beneficiaries find that selling inherited property to pay the entire tax bill upfront can be more cost-effective in the long run, avoiding years of interest payments. This is especially true in today’s higher interest rate environment.
Real-world Insights: Reddit Experiences with Inheritance Tax
Drawing from shared experiences on Reddit forums, many beneficiaries face common challenges when dealing with inheritance tax after the second parent dies. One recurring theme is the emotional and financial strain of managing property during the probate process.
One Reddit user shared: “My sister and I inherited our parents’ house worth about £600,000. We needed to pay £110,000 in inheritance tax within six months, but all our money was tied up in the property. We ended up taking expensive short-term loans while waiting for the house to sell. Looking back, a quick sale company would have saved us thousands in interest and stress.”
Another valuable insight from online discussions is that many beneficiaries underestimate the complexity and duration of the probate process. While they might plan for a three-month timeline, many estates take 9-12 months to settle completely, creating extended periods of financial uncertainty.
At Property Saviour, we’ve helped numerous sellers with these challenges by providing guaranteed property purchases with flexible completion dates that align with inheritance tax deadlines. Our team understands the unique pressures faced by those dealing with probate and inheritance tax, offering solutions that provide both financial certainty and emotional peace of mind during difficult transitions.
Whether you’re an executor seeking to fulfil your responsibilities or a beneficiary looking to settle tax obligations efficiently, we’re here to help with compassionate, practical solutions tailored to your specific circumstances. When time is of the essence, our guaranteed purchase service can provide the certainty you need to move forward confidently.
Selling an Inherited House to Pay Inheritance Tax
Many beneficiaries find themselves needing to sell inherited house quickly to cover inheritance tax liabilities, especially when the estate is primarily property-based with limited liquid assets. The traditional property market, with its lengthy timelines and uncertain completions, can create additional stress during this already challenging period.
For executors facing tight inheritance tax deadlines, having a guaranteed buyer can make all the difference. As a property buying company offering a “we buy any property” service, Property Saviour specializes in providing certainty during uncertain times. Our process is designed to be straightforward and transparent:
We provide a no-obligation cash offer
We can complete in as little as 7 days if needed
There are no estate agent fees or hidden costs
We buy properties in any condition
We handle all paperwork and legal requirements
Unlike traditional estate agent sales that can take months and often fall through, our guaranteed purchase provides the certainty needed when dealing with inheritance tax deadlines. We understand that selling a family home can be emotionally challenging, and our compassionate team approaches each situation with the care it deserves.
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