Estate tax returns and other procedures

Produced by Tolley

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

  • Estate tax returns and other procedures
  • Is a tax return required?
  • Informal arrangements
  • The trust and estate tax return
  • Disposals of UK residential property
  • Registering the estate
  • Penalties for late registration or filing

Estate tax returns and other procedures

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. See the Income tax during administration and Capital gains tax during administration guidance notes.

In accordance with the general rule under TMA 1970, s 7(3), there is no requirement for the personal representatives to notify chargeability where the only income received has been taxed at source. For tax years up to 2015/16, it was often the case that all of an estate’s income was taxed at source, since for many estates the only sources of income are interest and dividends. In that case, no return was necessary.

However, with effect from 6 April 2016, tax was no longer deducted at source on bank accounts, etc and the dividend tax credit was abolished. As it stands, the legislation requires that even very small amounts of investment income arising within the estate should be reported and tax paid in relation to them. PRs are not entitled to the savings nil rate band (also known as the savings allowance or personal savings allowance), whereby individuals may receive up to £1,000 of gross interest without an income tax charge, nor are they entitled to the dividend nil rate (also known as the dividend allowance) applicable to the first £2,000 of dividend income received by individuals.

HMRC recognises that the current regime imposes an additional administrative burden on PRs, and indeed on its own resources. Initially, as an interim measure for 2016/17 it was announced that PRs and trustees need not declare and pay tax on interest where the only source of income is savings income and the tax liability is below £100. This arrangement has been extended incrementally to 2022/23. See the May 2021 HMRC Trusts and Estates newsletter.

The concession does

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