Inheriting and tax credits

John_Pierpoint

sleepless_saver wrote: »

The £33000 does not count as income, it counts as capital. So you shouldn't enter it as income on either your WTC or your tax self assessment. It's only the income you have received from it i.e. interest that you need to put.

Personally I would take the capital sum as the total amount that came to you including any interest accrued while the solicitors were hanging on to it. Interested to know what others think about this. I would only put on the form any interest that you have received since you actually got the money.

Do you still have the ISAs? Income from ISAs is normally disregarded for working tax credit BUT the tax free status of ISAs held by someone who dies is lost on their death. So in this case the interest from any ISAs you still have would need to be included (even though you don't usually have to put them on a tax self assessment form). Some other sorts of interest are disregarded e.g first £70 of National Savings Investments but you would need to include all interest received on the tax and WTC forms, included any disregarded interest.

It's the gross interest rather than the after tax interest that should go on the forms.

Presumably all the income on your R185 has been taxed before you get it? (No dodgy foreign income for example)
Presumably you are a standard rate tax payer and the small increase in income on the R185 makes no difference to your status as a standard rate tax payer?

The R185 should show what sort of income you have from the estate post death.

Anyway this link, to the tax man's manual, shows what the tax man is looking for from his side of the fence:

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem7450.htm

sunnybobbi

There are 2 amounts savings income 66.13 and income taxed at 22% 291.36 so I just put the total of these figures in as other income?

John_Pierpoint

I wonder what sort of R185 you have been given?
Over the years I have issued and received several sorts.
They started off as little old fashioned manilla (brown) jobs sort of A5 size.
Then they grew a bit bigger.
At one stage I got a pink one.
Now they are the nice A4 coloured ones.
In the mean time the type of income has fragmented into different sorts of trusts and dividend income etc.
It is a battle of stealth taxes from a government that wants more and more tax and accountants who get cleverer at creating loopholes in the new taxes.
Meanwhile us ordinary people get caught in the ever increasing complexity.

I would expect your R185 to tell you what to do with the income.
Does it read:
If you need to complete a Tax Return the box numbers on page 2 match those on the Trusts etc. pages (SA107) of the Tax Return. Transfer the amounts of income after tax taken off from those boxes to the corresponding boxes on the SA107.

I cannot really comment on how to claim tax credits as I have never needed to claim any.

The form I'm talking about shows the net and tax paid figures (add them together to get gross if needed, methinks the tax man's computer now does this automatically).

I'm not absolutely clear what your 66.13 and 291.36 really represents.
These are net figures? Would the 291.36 be property income?
You cannot really add income taxed at 20% to income taxed at 22% and arrive at something meaningful.
http://www.hmrc.gov.uk/pdfs/r185_ei.pdf
It might help if you can visit a tax enquiry office with your forms and show someone your problem.
I say "might" because I tried it and got the "not in my skill set" treatment, when they realised I was talking about IHT paid on trust income. So I got fobbed off with an 0845 phone number.

sunnybobbi

Well thanks for all your help, I phoned them today and as I had not invested or saved the money but spent it I did not have to declare anything. So I should have just phoned in the first place :rotfl: