Inheritance Tax Before Probate: What a UK–Spain Estate Pays First

Which deadline comes first?

The two taxes are counted differently. Spanish ISD runs for six months from the day of death (RD 1629/1991 art. 67.1(a)). UK IHT is due six months after the end of the month in which the death occurred (IHTA 1984 s.226(1)); GOV.UK gives the example of a death in January, with IHT due by 31 July. So the Spanish date falls first, except near the end of a month, when the two dates can coincide. The site's Spanish inheritance tax deadline calculator gives the Spanish dates for a given date of death.

The Spanish period can be extended by a further six months if the heirs, an executor (albacea) or the administrator of the estate ask within the first five months; a request with no reply after one month is treated as granted, and a request made after five months is refused (RD 1629/1991 art. 68). The extension (prórroga) is counted from the end of the first six months and carries late-payment interest until the return is filed (art. 68.6). On the UK side, interest runs on IHT still unpaid after the six-month date (IHTA 1984 s.233).

Why the money is held back on each side

In England and Wales no grant of probate or letters of administration, together called a grant of representation, is made until the executors produce an account showing that the IHT payable on its delivery has been paid, or that none is payable, or the information for an excepted estate (Senior Courts Act 1981 s.109). The executors pay the tax they are liable for when they deliver that account, form IHT400 (IHTA 1984 s.226(2)). GOV.UK puts it for the whole of the UK: a payment towards any IHT due is usually needed before a grant, called confirmation in Scotland.

In Spain, banks and other financial intermediaries may not hand a deceased person's assets to anyone other than the holder without proof that the ISD has been paid or is exempt, unless the tax authority authorises it (RD 1629/1991 art. 91.4). A bank that releases the money without that proof becomes secondarily liable for the tax on it (art. 8.1(a) Ley 29/1987). Together these rules explain why an account is often described as frozen: they forbid release without proof of payment, but they do not by their own words require the account to be blocked on notice of the death.

Paying UK inheritance tax before the grant

Under the Direct Payment Scheme, the executors can ask a bank, building society or investment provider to pay some or all of the IHT to HMRC straight from the deceased's accounts, before the grant, with a separate form IHT423 for each account; GOV.UK notes that some providers are not part of the scheme. The executors can also make payments on account before the exact amount is known, and HMRC refunds any overpayment with interest after the grant (GOV.UK guidance on paying Inheritance Tax).

IHT on land of any description, wherever situated, which includes a Spanish home that is within UK IHT, can be paid in ten equal yearly instalments if the executors elect for it in writing (IHTA 1984 s.227(1) and (2)). The choice is made on form IHT400, the first instalment is due on the normal date, interest is added to later instalments, and the unpaid tax becomes payable when the property is sold (s.227(3) and (4); GOV.UK).

If the executors cannot release funds from the estate before the grant, they can ask HMRC to postpone all or some of the tax until after it, a grant on credit: they must first pay as much as they can and sign an undertaking to pay the rest as soon as possible after the grant (GOV.UK, Apply to postpone payment of Inheritance Tax).

Paying Spanish inheritance tax from the deceased's Spanish money

A bank cheque drawn on the deposits and made out to the tax authority, solely to pay the ISD, is not treated as a release, so the bank incurs no liability for it; the same applies to selling the deceased's securities on the heirs' instructions solely to pay the tax (art. 8.1(a) and (c) Ley 29/1987). The law does not oblige a bank to issue such a cheque.

The heirs can also file a partial self-assessment (autoliquidación parcial) covering only the money or securities on deposit, solely to withdraw them, if all the heirs agree (RD 1629/1991 art. 89.1). It is calculated on the value of those assets with no reductions, it counts as a payment on account of the final tax, and the full return still has to be filed afterwards (art. 89.2 and 89.4). Deferring or splitting a self-assessed ISD payment (aplazamiento or fraccionamiento) follows the general Spanish tax collection rules (RD 1629/1991 art. 90.1).

The return itself does not wait for the deed of acceptance, sometimes called Spanish probate although Spain has no probate court process: where there is no deed, the heirs file a declaration on plain paper with the death certificate, the Registry of Last Wills certificate and the will (RD 1629/1991 art. 66). The deed can follow later; the Land Registry will not register it without proof that the tax has been filed (art. 33 Ley 29/1987). On whether the deed also needs the UK grant, the Spanish registry authority has accepted that no UK grant is needed where the deceased, in a will made before a Spanish notary in Spain, chose the law of their British nationality for all their assets (Dirección General de Seguridad Jurídica y Fe Pública, resolution of 29 April 2024). That resolution does not settle other cases.

Each heir is taxed on their own share, but a full self-assessment must include all the heirs, with the agreement of all, or the payment counts only as a payment on account (RD 1629/1991 art. 86.1). A heir who lives outside the EU and EEA, which includes the UK, must appoint a representative resident in Spain for this tax and file the signed appointment with the return (Ley General Tributaria art. 47; RD 1629/1991 art. 18).

Common errors about deadlines and frozen accounts

"The Spanish six months starts when the UK grant is issued." It runs from the day of death (RD 1629/1991 art. 67.1(a)), and the return can be filed without a deed (art. 66).

"The UK and Spanish inheritance tax deadlines are the same." UK IHT is due six months after the end of the month of death (IHTA 1984 s.226(1)); Spanish ISD is due six months from the day of death (RD 1629/1991 art. 67.1(a)). The Spanish date comes first, except near the end of a month, when the two can coincide.

"A late Spanish return costs 5%, 10%, 15% or 20%." Those are old bands. A late return still has to be filed. Without a prior request from the tax office, the surcharge is 1% plus 1% for each full month of delay up to 12 months, then 15% plus late-payment interest; it is cut by 25% if paid promptly (Ley General Tributaria art. 27). Some regional reliefs are lost if the return is late.