Hidden away in the recent 2024 Spring Budget update is a small but interesting change to Inheritance Tax (“IHT”) payment rules, specifically concerning the process of obtaining a 'grant on credit' from HMRC. Effective from April 1, 2024, personal representatives of estates will no longer be required to seek commercial loans to pay IHT before probate when applying for a grant on credit.

Under the existing law, if personal representatives were unable to secure the necessary funds to pay IHT and could demonstrate to HMRC that they had exhausted all avenues to raise the money (which until recently included making enquiries to specialist lenders who offered IHT loans), HMRC might allow a grant on credit, enabling them to obtain probate before paying the IHT. However, HMRC's policy, as outlined in the IHT manual, limits the issuance of grants on credit to "exceptional circumstances", making it a non-standard practice.

The impact of the update is not yet clear. On the surface, the budget announcement appears to relax the requirements for obtaining a grant on credit and removed what could be quite an onerous loan agreement for personal representatives with high interest rates. However, it is unknown what impact the change will have on the availability of obtaining grants on credit with HMRC imposing other requirements before approving such applications are approved.

It’s important to bear in mind that the personal representatives are personally liable for the IHT on a deceased persons estate and need to make every effort to raise the funds to pay the IHT bill. If you would like more information or help with Inheritance Tax, please contact any member of our Wealth Management and Taxation team on 01494 521301.