Letter from HMRC (PAYE) after death

Kimbooley

Hi all.

I’m asking for your help once again. 

My mother in law died 4 weeks ago, and my wife and I (she is the administrator / executor and next of kin) have been dealing with her small estate. 

Anyway we received a letter today from HMRC saying that they may need to check if she paid the right amount of tax before she died. It could take up to 8 weeks to sort out but that they would only write to us again IF further action was required and money is either owed to them (or back to us)

would you mind helping me with some questions? 

1) I presume this would be her income tax?
2) Are they talking about calculating her income tax throughout her entire life, or just the most recent tax year leading up to the time of her death?

she has been retired since last summer so hasn’t had any earnings since then. And for a few months before she retired she was on statutory sick pay due to her chemo treatments. 

I’m wanting to send the money to the beneficiaries as per mother in laws wishes (no will) but I’m in limbo really until I know if we have to pay out any more money from her estate to HMRC is tax is owed to them. 

But I don’t understand if there would be? 

She council rented, owned no property, was not self employed at the time of her retirement / death. Led a simple life. Barely has an estate as such. 

So confused. 

Kimbooley

This is the letter we received. 

Ms_Chocaholic

What was the value of your MIL estate?

I would probably delay distributing the estate until after you hear back from HMRC, if you look at it positively it may be likely they could owe your MIL money. 

As she was PAYE, previous tax years are unlikely to be affected. Was this her only employment, she wasn't self employed or anything additional.

Kimbooley

Ms_Chocaholic said:

What was the value of your MIL estate?

I would probably delay distributing the estate until after you hear back from HMRC, if you look at it positively it may be likely they could owe your MIL money. 

As she was PAYE, previous tax years are unlikely to be affected. Was this her only employment, she wasn't self employed or anything additional.

Ms_Chocaholic said:

What was the value of your MIL estate?

I would probably delay distributing the estate until after you hear back from HMRC, if you look at it positively it may be likely they could owe your MIL money. 

As she was PAYE, previous tax years are unlikely to be affected. Was this her only employment, she wasn't self employed or anything additional.

She had £1720 left in her bank account. A credit card of almost £500 which has since been paid From the funds in the bank account. She had a car which had £3000 finance left on it which we have since settled privately and taken ownership. No property owned. Rented from the council. Only savings she had paid for her funeral. Nothing else of value really.

until her retirement last year she was on the sick due to chemo, but previously worked in a care home. No other form of income, nothing like that. 

Keep_pedalling

This will be regarding tax for this financial year. It is quite likely that she may have paid more tax than she should have as her PAYE code is based on her estimated earning for the year which is calculated in advance and based on her yearly income.

lisyloo

Personally I wouldn’t distribute anything until it’s sorted.

p00hsticks

You say she was retired - was she claiming a pension of any sort ?

I agree with Ms_chocolholic to wait at least eight weeks or until you hear back from them (whichever is sooner) before distributing the estate - four weeks is hardly any time at all and there may be other items that will filter through from the Tell Us Once service and elsewhere.

Bear in mind that if anything comes out of the woodwork after the estate has been distributed, then it;s going to be a case of either having to go to the beneficiaries to ask for money back or your wife covering the cost herself, neither of which is an enviable position to be in.  

Kimbooley

p00hsticks said:

You say she was retired - was she claiming a pension of any sort ?

I agree with Ms_chocolholic to wait at least eight weeks or until you hear back from them (whichever is sooner) before distributing the estate - four weeks is hardly any time at all and there may be other items that will filter through from the Tell Us Once service and elsewhere.

Thanks. And yes she had just started receiving her State Pension in May 2021 when she turned 66 but sadly died last month so didn’t benefit from much of it So about 7-8 months of State Pension...

she also had about £145 each month from her father’s private pension plan I think - he died about 15 years ago but I’m not sure how long she’s been receiving those. 

Other than that I think we came across a NEST pot she cashed in a few months ago but it was only £2-3K. 

BooJewels

For what it's worth, it is a standard letter - I think probably generated by using the Tell Us Once service - I got one each for the two estates I've done recently - it relates to the current year of income tax, as if she passed away mid-financial year, there may need to be some adjustment. 

In one of my cases, there was nothing done about it as he wasn't paying tax as he was on non-taxable benefits for that tax year and in the other case, he'd paid tax on a private pension already that year, but as he died before he got anywhere near his personal allowance, he got that tax back.  

If she only passed a month ago, it's perhaps too soon to be distributing the estate - especially as she had no will - if her stated wishes differ from the intestacy rules, you might end up in a family conflict.

Kimbooley

BooJewels said:

For what it's worth, it is a standard letter - I think probably generated by using the Tell Us Once service - I got one each for the two estates I've done recently - it relates to the current year of income tax, as if she passed away mid-financial year, there may need to be some adjustment. 

In one of my cases, there was nothing done about it as he wasn't paying tax as he was on non-taxable benefits for that tax year and in the other case, he'd paid tax on a private pension already that year, but as he died before he got anywhere near his personal allowance, he got that tax back.  

If she only passed a month ago, it's perhaps too soon to be distributing the estate - especially as she had no will - if her stated wishes differ from the intestacy rules, you might end up in a family conflict.

Thank you. Basically my MIL told us that whatever was left in her current account she wanted us to give it to her partner (not married). She left no will, and had only one child (my wife) so technically rules of intestacy state that my wife inherits everything but we want to abide by her wishes. I think in our minds we just don’t want to cause any friction with him if he struggles with rent or anything in the initial weeks since she passed but the more advice I get and the more letters that filter through the more I think we need to be sensible and keep the money back until we know 100% that everything is sorted, finalised, paid up and only then should we send him the money.

BooJewels

Thanks @Kimbooley for the explanation.  It does sound like it would be a non-contentious issue to resolve in your particular case - not all are that simple and easily resolved.  And money does seem to bring out the worst is some people, judging by some of the threads in this forum.  if your wife effectively gifts him the residuary funds at some point, she might need to do him a letter explaining where the funds have come from, just in case he gets asked.  I'm about to gift some of my inheritance to my son towards a house deposit and know that I need to provide proof of where the funds came from for the mortgage process.    Maybe someone else can comment if that's actually necessary.

I would suggest that 4 weeks is too soon to be trying to finalise everything - it's surprising how things sneak out of the woodwork over time.  I've been doing my father's estate for 18 months now (and acted as his attorney for 12 months before that - so was already familiar with his affairs) and things still arrive in the post out of the blue and my husband passed away last summer and something came in the post for him yesterday that I hadn't dealt with and I also got an email for him from a head hunter saying they'd heard he no longer worked at a particular place, was he interested in a role they have available.  Nope, not really in the job market.  I replied to explain and all I got back was "Condolences. I've removed him from our records."  So I'm afraid, it can potentially trickle on for a while.