Inheritance Tax Bridging Loans
Inheritance tax is due within 6 months of the date of death. Grant of probate - which authorises executors to sell estate assets - routinely takes longer than 6 months.
Pay IHT Before Probate Is Granted
The result is a structural funding gap: HMRC requires payment before the estate has the legal authority to realise the assets that would fund it. An IHT bridging loan, secured against estate property, provides the funds to pay HMRC on time while probate proceeds.
IHT Bridging Loans - August 2026
| Situation | Rate range | Security | Notes |
|---|---|---|---|
| Estate property - residential, unencumbered | 0.65%-0.80%/month | Estate residential property | Executor borrows against the inherited property. Bridge repaid when property sold post-probate. |
| Estate property - with existing mortgage | 0.75%-0.90%/month | Second charge on estate property | First charge lender consent required. Combined LTV must be within limits. |
| Multiple beneficiaries - one wants to retain property | 0.70%-0.85%/month | The property being retained | Beneficiary buyout funding. Bridge against the property; repaid when buyout completes. |
| Commercial property in estate | 0.85%-1.10%/month | Estate commercial property | Commercial asset adds complexity. Lender pool narrows. Wider rate range. |
| Large estate (IHT above £500,000) | 0.65%-0.80%/month | Best available estate security | Larger IHT liabilities attract lender competition. Better rates typically available. |
Indicative rates - August 2026. Rates change daily. Actual rate depends on LTV, security, credit profile, loan size, and exit strategy. Contact our team for a live rate comparison for your specific case. All rates sourced from lender product sheets and publicly available market data.
What determines your rate
HMRC grant on credit - when it applies
Since April 2024, personal representatives no longer need to demonstrate they have sought commercial loans before applying for HMRC's grant on credit (borrowing from HMRC to pay IHT and repay when the estate is sold). However, HMRC's grant on credit is only available for property held directly - not shares, business assets, or property held in trust. For most estates, bridging remains the most reliable and fastest route to pay IHT on time.
IHT nil-rate bands in 2026/27
The standard nil-rate band is £325,000 per person (£650,000 for married couples or civil partners). The residence nil-rate band (RNRB) adds up to £175,000 where a property is left to direct descendants - giving a potential £500,000 threshold per person (£1 million per couple). IHT is charged at 40% on the estate value above these thresholds. For a £900,000 estate with full thresholds used: IHT = (£900,000 - £500,000) × 40% = £160,000.
Security and executor authority
The executor has authority to borrow against estate assets before probate is granted. The bridging loan is taken in the executor's name on behalf of the estate. A solicitor should be involved to confirm the executor's authority and the borrowing terms are consistent with their duties to beneficiaries. Most specialist IHT bridging lenders are experienced in working with solicitors and executors.
Exit strategy
The primary exit for an IHT bridge is the sale of estate property post-probate. The bridge term must be sufficient to cover the probate timeline plus the property sale. If probate is delayed, the bridge term may need extending - arrange sufficient term at the outset (typically 12-18 months) to avoid extension fees.
HMRC instalment option for certain assets
HMRC allows IHT on certain assets (including land and unlisted company shares) to be paid in annual instalments over 10 years. Interest applies at 7.75% p.a. If the estate contains qualifying assets, instalments may be preferable to bridging for those specific assets - take specialist tax advice on the most cost-effective structure before applying for bridging.
Worked cost example
Estate: Residential property valued at £750,000. No mortgage. Estate above IHT thresholds - IHT liability: £100,000. Date of death: 1 March 2026. IHT deadline: 1 September 2026. Expected probate grant: October 2026 (7 months after death - 1 month after deadline).
IHT bridge: £100,000 at 0.70%/month (13.3% LTV on £750,000 property).
Term: 12 months (to allow time to sell property after probate granted).
Total interest (12 months, rolled): £8,946
Arrangement fee (1.5%): £1,500
Legal fees: £2,500
TOTAL COST: approximately £12,946.
HMRC interest if IHT paid 1 month late: £100,000 × 7.75% × (30/365) = £636.
HMRC interest if paid 3 months late: £100,000 × 7.75% × (90/365) = £1,908.
HMRC interest if paid 6 months late (common for probate): £100,000 × 7.75% × (180/365) = £3,815.
NET SAVING vs paying 3 months late: Bridge (£12,946) vs HMRC interest only (£1,908) - bridge costs £11,038 more.
NET SAVING vs paying 6 months late: Bridge (£12,946) vs HMRC (£3,815 interest + enforcement risk) - bridge costs £9,131 more but guarantees probate proceeds smoothly.
CRITICAL BENEFIT: bridge pays HMRC on time - probate process not delayed, no HMRC enforcement, no penalty notices to beneficiaries.
Bridge repaid from property sale proceeds after probate granted.
Rate context and outlook
The IHT landscape has changed significantly from April 2026: pension funds are now included within the IHT estate (previously exempt), and agricultural and business property relief is capped at £1 million. Both changes increase the number of estates subject to IHT and the average IHT liability. This makes IHT bridging more relevant than ever - a larger addressable audience and larger average loan sizes. Solicitors and financial planners advising on estates should be aware of DBF's IHT bridging service.
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Frequently asked questions
Can executors borrow against estate property before probate is granted?
Yes - executors have the legal authority to borrow against estate assets before the grant of probate in order to pay HMRC liabilities. The loan is taken in the executor's name on behalf of the estate. It is strongly advisable to involve the estate's solicitor in arranging IHT bridging to ensure the executor's authority and the borrowing terms are properly documented and consistent with their duties to beneficiaries.
What is HMRC's grant on credit and when is it better than bridging?
Since April 2024, executors can apply to HMRC for a grant on credit - effectively borrowing from HMRC to pay IHT and repaying when the estate property is sold. This is interest-free initially but HMRC's interest rates apply if the debt is not settled promptly. The grant on credit is only available for property held directly (not shares, business assets, or trust assets) and requires HMRC approval. Bridging is faster, more certain, and available for all asset types.
What if beneficiaries disagree about selling the property?
Where beneficiaries disagree, the executor's authority is to act in the best interests of all beneficiaries. An IHT bridge allows the IHT to be paid without forcing an immediate sale - buying time for the beneficiaries to reach agreement. If one beneficiary wants to retain the property, the bridge can be structured to allow a buyout of other beneficiaries' interests.
How long does IHT bridging take to arrange?
For a standard residential estate property with clear title and a willing executor, 10-21 working days from application is typical. The HMRC IHT reference number should be obtained before application - this is needed to make the HMRC payment. If the estate includes complex or disputed assets, additional time may be required.
What is the IHT interest rate charged by HMRC on unpaid tax?
HMRC charges interest on late IHT at the same rate as all other late payment interest: currently 7.75% per annum (Bank of England base rate + 4%, in force from 9 January 2026). On a £200,000 IHT liability, each month of delay costs approximately £1,292 in HMRC interest, plus any applicable penalties. An IHT bridge at 0.70%-0.80%/month costs £1,400-£1,600/month on the same amount - broadly comparable to HMRC interest but with the additional benefit of avoiding enforcement action.
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