Confused about inheritance and income tax

Roberta1

Hi All

I'm lucky enough to have recently inherited £15k. One part of this was a gifted amount and the rest was a percentage of the residue of the estate.

The letter which came from the solicitor said "when the final distribution of the estate is made, we will be sending you a copy of the estate accounts together with a cheque and a certificate of income received so that you can add this income to your personal tax return".

1) I thought inheritances were seen as transfer of capital and not income? Is this wrong? Is this inheritance regarded as part of my income for this tax year? OR:

2) Does he mean that the amount has been accruing interest during the administration period and I am liable for income tax on that?

3) I don't fill in a tax return anyway and in actual fact I am not currently a tax payer, but if the above amount is counted as inheritance I will be!

4) Surely all tax due is dealt with out of the estate?

Help please!
R.

NordicNoir

The actual capital amount that you receive from the estate is not taxable. If the estate received income after the date of death, e.g. interest, dividends, these are taxable.

Normally, the interest etc. will have had basic tax deducted before it was paid to the estate. The estate issues a R185 form to the beneficiary showing what income you have received and how much tax has been paid.

A basic rate taxpayer will have nothing more to pay, a higher rate tax payer will need to pay more tax and a non tax payer may be due a refund.

Once you have your final inheritance, and the R185, it will give you more details of what you should do about your tax.