Tax treatment of income received by beneficiaries under a Will
Produced in partnership with Tolley Guidance
Tax treatment of income received by beneficiaries under a Will

The following Private Client guidance note Produced in partnership with Tolley Guidance provides comprehensive and up to date legal information covering:

  • Tax treatment of income received by beneficiaries under a Will
  • Treatment of income payments to beneficiaries during administration
  • Income tax payable by specific legatees
  • Income tax payable by general and pecuniary legatees
  • Income tax payable by statutory legatees
  • Income tax on payments to residuary beneficiaries
  • Beneficiaries entitled to a limited interest in residue
  • Beneficiaries entitled to an absolute interest in residue
  • Beneficiaries with successive interests
  • Beneficiaries with a discretionary interest in residue
  • more

On an individual's death, the personal representatives (PRs) will generally wish to calculate and settle the inheritance tax (IHT) liability in order to obtain the grant of probate and administer the estate. The PRs are also responsible for finalising the deceased's tax affairs to the date of death and often the income tax and/or capital gains tax (CGT) owed by the deceased will impact on the precise IHT liability.

The PRs will then need to account separately to HMRC for any income (or gains) arising during the administration period. The administration period runs from the date of the death and ends when the estate has been wound up or at least once the residuary estate has been ascertained and is able to be distributed or held in trust. It is not always clear precisely when the administration period has ended, but HMRC will generally accept the PRs' view on when this is. For further information on the general income tax position during the administration of an estate, see Practice Note: Income tax and capital gains tax during administration.

Treatment of income payments to beneficiaries during administration

During the administration period, income may arise on some estate assets. The PRs may decide to make interim distributions to beneficiaries entitled to inherit under the deceased's Will or on intestacy and some of these