Beneficiaries’ estate income ― minor interests

Produced by Tolley
Beneficiaries’ estate income ― minor interests

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Beneficiaries’ estate income ― minor interests
  • Income tax payable by specific legatees
  • Income tax payable by pecuniary legatees
  • Beneficiaries with a limited interest in residue
  • Beneficiaries with a discretionary interest in residue
  • Beneficiaries with a successive interest in residue
  • Deeds of variation

This guidance note should be read in conjunction with the Income tax for beneficiaries of estates guidance note which explains the general principles under which estate income is recorded and distributed.

Beneficiaries’ entitlement to estate income, and consequently their liability to income tax, depends on the nature of their interest under the Will or intestacy. In the majority of estates, the only type of beneficiary interest which gives rise to an income tax liability on estate income is an absolute interest in residue, which is covered in the Income tax for beneficiaries of estates guidance note. This guidance note focuses on other types of interest which may give rise to an income tax liability, as follows:

  1. specific legatee

  2. pecuniary legatee

  3. limited interests

  4. discretionary interests

  5. successive interests

As with absolute interests, the share of income for these types of beneficiary must be calculated by the personal representatives and communicated to the beneficiaries. Standard practice is by use of the HMRC form R185 (Estate income). See the Tax compliance for beneficiaries of estates guidance note.

Income tax payable by specific legatees

Specific beneficiaries are entitled to income arising on the asset bequeathed to them from the date of death. This general rule is consistent with the tax provision that excludes income from specific gifts from the definition of aggregate estate income.

Many specific gifts, such as jewellery and other personal items, do not give rise to income. If that is the case the beneficiary has no income tax liability. Income will arise on specific gifts of tenanted property, shareholdings, or a designated bank account.

In accordance with the general rule, specific beneficiaries cannot be assessed on income until they receive it. In the meantime, the income is taxed as estate income in the hands of the personal representatives.

Once the asset is vested in the beneficiary, and the incom

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