Estate tax returns and informal procedures
Estate tax returns and informal procedures

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Estate tax returns and informal procedures
  • Is a tax return required?
  • Informal procedures
  • The Trust and Estate Tax Return
  • Estates registration service

Is a tax return required?

Personal representatives (PRs) have a duty to report to HMRC any untaxed income received during the period of administration and any capital gains which have arisen in that period on the sale of property forming part of the deceased’s estate. In accordance with the general rule under section 7(3) of the Taxes Management Act 1970 (TMA 1970), there is no requirement for the PRs to notify chargeability where the only income received has been taxed at source or has a tax credit attributed to it (eg bank interest, dividends prior to 6 April 2016). In many cases up to tax year 2015–16, all of the estate income had been taxed at source and no return was necessary.

From 2016–17, the taxation of dividend income changed with the abolition of the dividend tax credit. Tax is no longer automatically deducted at source on bank accounts. As PRs do not benefit from the dividend allowance nor the personal savings allowance available to individuals, PRs could potentially need to declare and pay tax on very small amounts of estate income which would have previously been covered by deduction at source and the dividend tax credit, but see the following paragraph. If tax is due, this may necessitate the completion and filing of a tax return by the PRs.