Inheritance, and child tax credit renewal

Savvy_Sue

A bit more digging around, and dividends paid so far (still a few shares to sell so possibly another dividend to come) come to about £30 to each of us in both the 2014-15 tax year, and the current tax year.

They've already had 10% tax taken off.

So I reckon we all owe HMRC about £3 each for last tax year, and probably the same again this tax year.

Does that sound about right?

System

As the executors are converting all the assets (shares, property etc) to cash while part of the estate then any extra tax obligations re dividends etc is on the estate.

The beneficiaries are purely getting cash bequests and have absolutely no link to how/where the money was generated so the answer that you already have that an inheritance doesn't count is the answer

I think people have looked too deep into it and are imagining share transfers to the beneficiaries etc

getmore4less

!!!!!! wrote: »

As the executors are converting all the assets (shares, property etc) to cash while part of the estate then any extra tax obligations re dividends etc is on the estate.

The beneficiaries are purely getting cash bequests and have absolutely no link to how/where the money was generated so the answer that you already have that an inheritance doesn't count is the answer

I think people have looked too deep into it and are imagining share transfers to the beneficiaries etc

Any dividends received by the estate during administration and then transfered to beneficiaries is INCOME.

getmore4less

Savvy_Sue wrote: »

A bit more digging around, and dividends paid so far (still a few shares to sell so possibly another dividend to come) come to about £30 to each of us in both the 2014-15 tax year, and the current tax year.

They've already had 10% tax taken off.

So I reckon we all owe HMRC about £3 each for last tax year, and probably the same again this tax year.

Does that sound about right?

Dividends do not have tax taken off they come with a tax credit.
(budget has changed this for the future)

This cover the obligations for basic rate taxpayers so no further tax to pay(as long as the grossed up dividend does not take you into the High Rate)


With these sort of numbers I think you can safely ignore the income tax situation,

Probably should be added to the tax credit forms which was the original question.

Savvy_Sue

Thank you! That was the answer I was hoping for ...

Savvy_Sue

getmore4less wrote: »

One thiing to watch is if there was any income paid during admin within an ISA or an account where income was paid gross that won't have been taxed sometime it happens before the notifications get acted on.

There was an ISA - are you saying that the proceeds of that 'count' for the purposes of tax returns? Or that any interest paid on the ISA between DoD and distribution 'counts' for that purpose?

If I'm still confused, I'd like to get the spreadsheet up to date and let our accountant take a look. It's nearly there but there are some accounts where I think we have a 'DoD value' and a 'what we actually received' value but I'm not 100% sure. And one of them's an ISA.

Fortunately apart from the ISA, Mum paid tax on all her savings.

FreeBear

Savvy_Sue wrote: »

Fortunately apart from the ISA, Mum paid tax on all her savings.

Interest paid on ISA savings are tax free. On death, the ISA should have been closed and the funds transferred to a deposit account by the bank.

As I understand it, the original question from one of the beneficiaries was 'I’m trying to complete our Child Tax Credits renewal form..." - The inheritance, when paid to the beneficiary, would need to be declared as “Income from trusts, settlements and estates”. This would (normally) be tax free and would be regarded as capital when calculating benefits.

Does the beneficiary in question also claim other benefits such as housing & council tax relief ?
If so, the council (and DWP if applicable) will also need to be informed when he/she has received the money.

System

getmore4less wrote: »

Any dividends received by the estate during administration and then transfered to beneficiaries is INCOME.

Sorry I disagree, dividends cease to be that once they hit the executors account. When the bequest is paid out there is nothing stipulating that £x is dividends. The beneficiary gets a lump sum inheritance, it does not get dissected into the origins of the money so you can not say how much came from where.

What happens if a beneficiary turns around and says I got nothing from the dividends, all my money came from the sale of the deceased's house. how can you prove otherwise?

The beneficiary gets an inheritance. How the money is derived is hidden from and of no concern of the beneficiary.

getmore4less

!!!!!! wrote: »

Sorry I disagree, dividends cease to be that once they hit the executors account. When the bequest is paid out there is nothing stipulating that £x is dividends. The beneficiary gets a lump sum inheritance, it does not get dissected into the origins of the money so you can not say how much came from where.

What happens if a beneficiary turns around and says I got nothing from the dividends, all my money came from the sale of the deceased's house. how can you prove otherwise?

The beneficiary gets an inheritance. How the money is derived is hidden from and of no concern of the beneficiary.

That is not what HMRC says.
(links in previous posts)

System

That is talking about an ongoing income from an estate not final winding up amounts which what is really being discussed here.

The name of the form is a giveaway - Income from Estates. They are not getting an income.

They beneficiary is not receiving a dividend from the estate. The estate is receiving the dividend. The beneficiaries are not receiving an income from the estate.

If the residue of the estate was invested and the resultant dividends paid out to the beneficiaries then THAT would be income.

All monies are being held in an executors account until all monies collected in (as it should be) and lump sums are being paid out.