Is this taxable income

life_of_pie

Hi New to forum. Asked this in another forum but any tax experts please help.

Today out of interest i phoned the Tax Credit people out of interest i have recently returned to work and having a disabled wife i was interested in the possibility of Tax Credits .

The lady i spoke to seemed very robotic in her mannerism and said i would probably from the figures i had given qualify for £90 PW Aprox . During the conversation i had asked to ask a question as she was in robot mode ,but been told to wait till the end .

The end arrived and i asked my question " Does my wifes inheritance in 2012 of £35,000 affect my ability to claim ?

Oh she said why did not you mention this ? I tried to i said you told me to wait .

She asked me if when my wife received the Inheritance did the letter from solicitor state if it was taxable income ? I said it did not just the usual waffle about income based benefits etc .

She said it would be counted as taxable income . I asked my friend an accountant about it he said the money is classed as savings and is not taxable income . However interest earned in the money might be considered so .

I also asked the solicitor concerned he said that it was probably not taxable income and to take the accountants advice who was best qualified .

A few facts my wife was not sole beneficiary and the total estate was not worth more than £300,000

The estate was dealt with properly by a probate firm

My wife is disabled and does not work i have until recently cared for her and received carers allowance events have allowed me to at last return to work thank god !

However when my wife inherited this money we found we were immediately not entitled to income based benefits like housing benefit income support etc . As a result the money quite rightfully has paid rent and council tax and other bills that is only fair .


Can anyone advise if the money is taxable income most people i have asked have said no only money generated from the money is for eg interest .

The money is not in a savings account so interest has been very small anyway i am guessing possibly £10 since being in receipt of the £35k if its not in a savings account does that make something else ? Does it have to be in a savings account ? Does the £10 need to declared to the HMRC ?


My wife receives the soon to vanish Incapacity benefit contribution based and also DLA high mobility and middle care rate we told the dwp of my wifes inheritance they advised neither were affected just income support carers allowance and housing benefit . They said they werent interested and thanks for informing them . Obviously my income based benefits were stopped . We lived off the money since last May 2012 .

Any advice welcome is this Taxable income ?
Last edited by life of pie; Today at 8:18 PM.

dori2o

It's not taxable to the beneficiary, but any interest gained on the amount is taxable after the first £300. (i.e. the first £300 of 'other income' which includes interest is disregarded)

Unfortunately the adviser you spoke to has guessed at the answer.

The problem is the vast majority of tax credits staff are not tax trained so this information isn't second nature to them.

xylophone

The bequest is capital in the hands of the recipient. If invested or saved this capital may generate interest or dividends. This is income and may or may not be taxable depending on various factors.

John_Pierpoint

The estate was dealt with properly by a probate firm

Oh yes ! Perhaps ?

First we need to understand what your wife has inherited?

Assuming the deceased did not live in Scotland:

Was the estate sorted out by an executor acting as instructed by a valid will or administered according to the default rules by someone appointed in "letters of administration" ?

Assuming there was a valid will, what did it say?

Something like "I leave £35,000 to [disabled wife]" or was it not a specified sum but the proceeds of sale of house/shares/savings certificates...............etc.

How soon after the death was the final settlement made?

Unless the amount was a specific sum and it was paid within 12 months of the death, the sum you received almost certainly should have included some income earned by the capital since the death. Though with current rates of interest available on savings it might be a small amount.

The tax already paid by the part of the inheritance that is the income earned should have been detailed to your wife on this form:

http://www.hmrc.gov.uk/pdfs/r185_ei.pdf

So to really know where she stands, assuming that the £35k was not specified as a fixed sum in the will and was paid promptly, your wife needs:
A copy of the will.
A copy of the letters of administration if there was no will.
A copy of the accounts showing how the estate was valued and how that value was distributed.
The form R185 showing the element of income and the tas already paid.

Don't expect instant co-operation, it is a bit like asking your GP to justify his diagnosis and treatment on your way to getting a second opinion. Your request in the first instance should be made to the personal representative (executor or administrator.)

If you meet total lack of co-operation the will and the "admon" (grant of probate naming the accepted personal representative(s)) are public documents and so you can buy copies.