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PPI Tax for the Deceased

wildcath_20
Posts: 41 Forumite


My deceased Mother has been taxed on a successful PPI claim which was paid after she had died. HMRC are saying this cannot be claimed back as all income received after a person is deceased is taxable.
She was on disability allowance for the last 3 years of her life and therefore had no other income. Therefore what it comes down to is if the PPI payment was made before she died then she could claim the tax back as it would have been her only income but because she was deceased then HMRC are saying she had no tax code so it will be taxed at 20%. Is this right?
The tax amounts to £600.
The tax amounts to £600.
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Comments
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Yes, the estate is automatically taxed on any income. So, that is correct.
Date of payment is the key thing. If it was after death, then the interest is not reclaimable.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
If the tax is £600. that suggests interest of £3,000 - in addition to the refund of the premiums. Is this correct? Tax should only be paid on the interest.
Also, if the interest was actually paid in the tax year in which she died I suspect there may be scope for appeal.0 -
Thanks for all of your advice. The refund was paid in the tax year after she died so I do not think there would be any way to appeal to HMRC. Every time I have spoken to HRMC they have changed their answer which was why I was getting very confused.0
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In the year of death, income earned up to the date of death goes against the personal allowance. Income earned after the date of death is taxable. So, the tax year is effectively cut in two.
And to copy and paste what HMRC says:
The starting and higher rates do not apply to personal representatives in the same way as they do for individuals. Personal representatives do not get personal allowances.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Sorry to piggyback on an old post but my query is similar.
I have successfully made claims for PPI this year and I understand the interest received is classed as income as far as HMRC are concerned and therefore taxable. I am applying for refunds of this tax from HMRC.
I have also just received a successful award letter regarding PPI on a loan in my late mother’s name. From the above I understand the tax on the interest cannot be reclaimed as the refund and interest are classed as my mother’s income.
Therefore, am I right in assuming that this interest payment is not classed as MY income** even if it is paid to me as administrator, and not classed as as my dad’s income if paid to him as her next of kin?
**HMRC add up my wages plus PPI interest received plus any other income when calculating my gross income for the year and this determines how much tax I pay. It also affects the amount of tax credits I may get. So I’m basically asking if the PPI interest I receive for my mother’s Policy will have any bearing on this?0 -
Sorry I am unable to edit my last post, but I wanted to also ask:
Is the interest classed as part of the Personal Savings Allowance; ie. if my interest from savings and interest from PPI is less than £5000, I shouldn’t pay any tax? Or is PPI Interest classed differently to savings interest and will only be tax free if my earnings from all sources are less than my personal tax allowance (eg. 1191L / £11,910). So confused!!0 -
Lockardian wrote: »..
Therefore, am I right in assuming that this interest payment is not classed as MY income** even if it is paid to me as administrator, and not classed as as my dad’s income if paid to him as her next of kin?
It belongs to the estate.
You distribute the income to the beneficiaries. You complete a R185.
https://www.gov.uk/government/publications/trusts-and-estates-statement-of-income-from-estates-r185-estate-income0 -
Thanks. As there was no will, the funds from my mother’s bank account were paid to me as administrator. This is the same company so I assume they will pay this to me. I still don’t understand whose money it then becomes (in the eyes of HMRC). If I keep it, does it form part of my tax allowance? If I give it (or some of it) to my dad, does it form part of his? Or does it remain (in the eyes of the taxman) my mother’s money (and therefore not Linus’s to me or my dad’s tax affairs)? Can anyone advise please?0
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Lockardian wrote: »Thanks. As there was no will, the funds from my mother’s bank account were paid to me as administrator. This is the same company so I assume they will pay this to me. I still don’t understand whose money it then becomes (in the eyes of HMRC). If I keep it, does it form part of my tax allowance? If I give it (or some of it) to my dad, does it form part of his? Or does it remain (in the eyes of the taxman) my mother’s money (and therefore not Linus’s to me or my dad’s tax affairs)? Can anyone advise please?
As antrobus has said, the payment belongs to your mothers estate.
As you say she didn't leave a will then her estate needs to be distributed according to the intestacy rules - in England or Wales this means that the first £250,000 goes to your father.0 -
Thanks. I do understand all that - perhaps I’m not making my question clear (or I don’t understand the implications of your advice that the money belonging to my mother’s estate).
I assume that the PPI interest is classed as my mother’s money - HER PPI interest/savings income - it will show on her tax records and SHE has been taxed on it. As far as HMRC are concerned, the 20% tax is paid (deducted by bank before payment).
Whoever subsequently gets the money doesn’t then matter to HMRC? If the bank transfer the funds into my bank (or make the cheque payable to me) as administrator and I distribute it accordingly (to my dad, myself, the milkman etc) this does not mean that we, as beneficiaries, now have “savings PPI income” or “PPI interest income”. Is that right? It can’t be part of my mother’s taxable income and also ours. So we don’t have to declare it as “income” to HMRC and they won’t take it into consideration in our tax affairs?
That’s what I’m wondering. I hope it makes sense.0
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