Income tax and capital gains tax during administration
Income tax and capital gains tax during administration

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

  • Income tax and capital gains tax during administration
  • Rates of tax on sources of estate income
  • Tax reliefs on estate income
  • Capital gains made by PRs

When the estate of a deceased individual is being administered, the assets will often generate income and sometimes gains will accrue. The period of administration runs from the day after the date of death and ends when the estate is effectively wound up. During that period, income received by the personal representatives (PRs) and gains realised on the sale of estate assets are assessed on the estate as a separate entity.

It may not be easy to determine the date of cessation of the administration. HMRC takes the view that it is the date when the residue has been ascertained, but accepts that the administration may continue beyond that point. For practical purposes, it is a useful rule to apply. The residue is ascertained when all assets are collected and debts and liabilities are agreed. The PRs may still hold assets or cash on behalf of the beneficiaries, but they hold them as bare trustees. In practice, HMRC will often accept whatever date is decided on by the PRs unless it is clearly artificial and offers a tax advantage.

Rates of tax on sources of estate income

Tax on estate income is at standard rates for all sources of income. Regardless of the level of income, PRs pay income tax at the basic rate. They do not pay tax at