Probate: Informal tax payment arrangements

‘Do I have to pay tax on inheritance?’ is not the first thing we think when a loved one passes away, however this may be a question we face further down the line. When someone dies, their estate will still be liable for income tax and capital gains tax during the estate ‘administration period’. This is the period during which the personal representatives apply for probate, collect in the deceased’s assets and pay their liabilities.

Estates are divided into two categories: complex estates and non-complex estates.

What are complex and non-complex estates?

Complex estates are where:

• The value of the estate exceeds £2.5 million
• Tax due (i.e. income tax and capital gains tax) for the whole of the administration period exceeds £10,000
• The proceeds of assets sold in any one tax year exceeds £500,000 (for deaths after 5 April 2016)

Non-complex estates are where none of the above criteria are met.

If the estate falls into the complex category, self-assessment tax returns will be required annually by 31 January each year in line with the usual self-assessment deadlines.

Informal payment arrangements

The personal representatives (PRs) of non-complex estates do not need to file formal tax returns. Informal payment arrangements can be used. The PRs simply provide HMRC a calculation of the amount of tax due at the end of the administration period and HMRC will issue a payment slip and reference number, which is to be used to make a one-off payment of the total tax due.

Need help?

If you need professional advice or assistance on probate or post-death tax matters, please speak to Ian Webster or Cindy Chaplin or email probate@larking-gowen.co.uk. You can find contact details in the Our People section of our website.

We are accredited by the Institute of Chartered Accountants in England & Wales to provide probate services.

Ian Webster