Income Tax on Interest After Death

le_loup

Can anyone give me some guidance on paying income tax on interest paid between the date of death and payment to beneficiaries?
The amount is likely to be around £200 - £300 and I am assuming that NS&I and banks will not deduct 20% under the new rules.
Thanks

antrobus

le_loup wrote: »

Can anyone give me some guidance on paying income tax on interest paid between the date of death and payment to beneficiaries?
The amount is likely to be around £200 - £300 and I am assuming that NS&I and banks will not deduct 20% under the new rules.
Thanks

The estate has to pay any tax due in income received. But note:

HMRC’s announcement that, for the 2016/17 tax year, personal representatives dealing with estates in administration do not need to report income and pay tax where:

• the only source of income is savings interest; and
• the tax liability is below £100.

If you need help, you can also call HMRC's helpline for bereavement and deceased estates. You can find the details on the GOV.UK website.


See here
http://www.litrg.org.uk/tax-guides/bereavement-and-tax/how-estate-taxed-during-administration#toc-tell-me-about-the-estate-and-income-tax

le_loup

Great help. Thanks.

polymaff

le_loup wrote: »

Can anyone give me some guidance on paying income tax on interest paid between the date of death and payment to beneficiaries?
The amount is likely to be around £200 - £300 and I am assuming that NS&I and banks will not deduct 20% under the new rules.
Thanks

The estate pays basic-rate on all interest it receives. When the estate distributes, it should issue an R185 to each beneficiary of the interest. The beneficiaries then use the R185 to justify a rebate, or to discharge their liability, depending upon their own tax status

le_loup

Oh - how interesting.
I thought the estate was subject to unrecoverable income tax. In this case, two of the beneficiaries will be non-taxpayers so this info is vey useful.
Thanks

polymaff

le_loup wrote: »

Oh - how interesting.
I thought the estate was subject to unrecoverable income tax. In this case, two of the beneficiaries will be non-taxpayers so this info is vey useful.
Thanks

Even those who are tax-payers may benefit by "tucking" the inheritance under otherwise unused Starting Rate and/or Personal Savings Allowances.

le_loup

Next question:
Is there tax on the estate for interest on NS&I Index Linked - normally tax free and the same for Cash ISAs?
I bet there is but I can find no references on the web and last time I rang HMRC I got "You'll have to write us a letter so we can decide whether tax is payable or not. We will respond in about SIX weeks."
All the money is in - I want to distribute it and enjoy what remains of the summer!
Thanks guys.

sheramber

The tax free cash ISA ceases on death of death. So any interest arising up to date of death is tax free. Any interest arising after date of death belongs to the estate and is taxable on the estate.

Similarly interest arising up to date of death on NS&I index linled will be tax free.

le_loup

Thanks for that. I did expect it to be so but getting it from HMRC is like having the death of a thousand cuts!