HMRC: Income Tax of Deceased Person

Misha96

Following my uncle’s death earlier this year I completed the Tell-Us-Once form.  Two months later, I received a generic letter from HMRC “signed” with a forename only.

The letter read, “When someone dies, we need to work out if they paid the right amount of tax before their death.” A brief form was included. I completed it as executor. I also wrote a covering letter with details of my uncle’s income from taxable sources. I did not then have Grant of Probate but was able to state that my uncle’s income from tax-paying savings would amount to less than his £1000 personal allowance. That is indeed the case.

Three months later, I haven’t heard another thing from HMRC. Am I likely to? Ought I to contact them to complete the administration of the estate?

Misha

 

mr_stripey

Misha96 said:

Following my uncle’s death earlier this year I completed the Tell-Us-Once form.  Two months later, I received a generic letter from HMRC “signed” with a forename only.

The letter read, “When someone dies, we need to work out if they paid the right amount of tax before their death.” A brief form was included. I completed it as executor. I also wrote a covering letter with details of my uncle’s income from taxable sources. I did not then have Grant of Probate but was able to state that my uncle’s income from tax-paying savings would amount to less than his £1000 personal allowance. That is indeed the case.

Three months later, I haven’t heard another thing from HMRC. Am I likely to? Ought I to contact them to complete the administration of the estate?

Misha

 

I had the same with my late father who died in 2021. Had the holding letter (same as you received). I responded to the letter but never heard anything since!

jlfrs01

I had something similar when acting as Executor of my late father's Estate. 

My Solicitor contacted the DWP over a suspected over-payment of my dad's Civil Service pension, 8 months later when Probate was granted and the Estate distributed my Solicitor wrote to them again, advising that monies were to be imminently distributed. She advised we hold some of the money back, just in case and for any other expenses - I agreed so £2500 was retained on account. Just as well - DWP did eventually get in touch asking for £682. We also had a bill in from the Undertaker's for the memorial stone which was nearly a year late!

I think government departments run at a snail's pace so it may be best to keep something back to cover any eventualities because if you do need to pay a tax bill, it will be the Executor's job to get the money back from the beneficiaries. 

BooJewels

They do work at a snail's pace - but they tend to be faster when you owe them!  With the most recent one, as she only received state pension, I quickly got a letter saying all was in order and nothing to pay.  With my father a year or so earlier, who died in the April, I didn't get a final letter until December, with a cheque attached as he'd already paid tax on his private pension the month he died, so was way below his personal threshold for the year.

I still think there might be an outstanding amount with my Aunt to potentially pay back to the DWP, so my sister and I have put aside a portion of our share just in case. 

crashedandcool

I'd phone them especially if you can find a bereavement team phone number. I've been on the phone to everyone and HMRC seem fine to speak to. I'm been detailing my late fathers estate and HMRC will owe his estate an income tax refund. I was given around 8 weeks for a decision, but that this was more from when they were ready to process it. Any sources of income(employer, pension fund) need to send final accounts to HMRC(like P45s) and sometimes they drag their feet.

Misha96

 

As stated above:

Following my uncle’s death earlier this year I completed the Tell-Us-Once form.  Two month later I received a generic letter from HMRC “signed” with a forename only.

The letter read, “When someone dies, we need to work out if they paid the right amount of tax before their death.” A brief form was included. I completed it as executor. I also wrote a covering letter with details of my uncle’s income from taxable sources. I did not then had Grant of Probate but was able to state that my uncle’s income from tax-paying savings would amount to less than his £1000 personal allowance.

Three months later, I haven’t heard another thing from HMRC. Am I likely to? Ought I to contact them to complete the administration of the estate?

Anyway, I wrote to HMRC again on 20 July. Having brought all his liquid assets together, I was in a position to detail the interest paid from taxable savings. Because my uncle was unwell before interest rates  began to rise, the interest is well below his £1000 personal allowance. I gave a precise figure.

Do you think they will accept my word or send my forms in months to come?

This is not a huge estate. It’s been a lot of work and I’d really like to be able to say, “I’ve done it. I’ve done my best. It’s over. Now I can grieve for an uncle who was more like a Dad.”

Thanks,

Misha

BooJewels

A couple of points - firstly, you don't just have £1000 allowance for savings interest - that's on top of the personal allowance and the savings starting rate of up to another £5,000 (reduced £ for £ by how much over your personal allowance other earnings are) - so you'd only pay tax on interest if all his income, including interest was over £18,570 - any unused personal allowance can be used for interest.  So it depends on what other income your uncle had and when in the tax year he died, as to whether any tax would actually be payable - you mentioned that there was some taxable income.  See https://www.gov.uk/apply-tax-free-interest-on-savings

Secondly, HMRC don't need to take your word on the interest numbers, each organisation also reports what interest was paid, that's why savings organisations usually ask for your NI number when opening accounts.  So HMRC do have the means already to ratify your figures.  When those numbers are reported and how long it all might take, I couldn't possibly guess.

If you have all the information on uncle's income and any tax deducted etc. can you work it out yourself if any tax is likely to be due and keep a bit more than that aside?  It doesn't fully close off the estate, but would allow you to distribute most of it and forget about it until you hear.  I had to wait 8 months after finishing my father's estate to pay the CGT we owed, so I know how frustrating it is not being able to finally close the door, whilst waiting for HMRC.

There's a tax forum here where they can perhaps help you work it out.

Misha96

BooJewels said:

A couple of points - firstly, you don't just have £1000 allowance for savings interest - that's on top of the personal allowance and the savings starting rate of up to another £5,000 (reduced £ for £ by how much over your personal allowance other earnings are) - so you'd only pay tax on interest if all his income, including interest was over £18,570 - any unused personal allowance can be used for interest.  So it depends on what other income your uncle had and when in the tax year he died, as to whether any tax would actually be payable - you mentioned that there was some taxable income.  See https://www.gov.uk/apply-tax-free-interest-on-savings

Secondly, HMRC don't need to take your word on the interest numbers, each organisation also reports what interest was paid, that's why savings organisations usually ask for your NI number when opening accounts.  So HMRC do have the means already to ratify your figures.  When those numbers are reported and how long it all might take, I couldn't possibly guess.

If you have all the information on uncle's income and any tax deducted etc. can you work it out yourself if any tax is likely to be due and keep a bit more than that aside?  It doesn't fully close off the estate, but would allow you to distribute most of it and forget about it until you hear.  I had to wait 8 months after finishing my father's estate to pay the CGT we owed, so I know how frustrating it is not being able to finally close the door, whilst waiting for HMRC.

There's a tax forum here where they can perhaps help you work it out.

Thank you for such a helpful answer.

From my careful calculations, I do not believe my uncle’s estate owes HMRC as much as 1p. I helped him complete his tax returns for a couple of years and he never owed more than £2.

My uncle’s income for 22/23 was over £18,575. His primary source of income was an annuity. His State Pension and taxable interest before the £1000 tax-free allowance was initiated were taxed by way of the annuity and he received a net payment every month. That was up-to-date at the time of his death. The interest on savings was peanuts in the last two financial years.

Thanks again,

Misha

BooJewels

My Dad's was like that - a private pension that paid the tax for him - he ended up [eventually] getting some back from HMRC as it was early in the tax year, so he'd all of his unused allowance still available.  So if your uncle died 'earlier this year', it might well have been late in the 22/23 tax year - so timing's a factor too.  

It sounds like you might be well clear then - perhaps just keep a modest amount aside in case of any potential adjustments.  You might even get some back.  The latest estate I've done is my aunt's and my sister and I have left a sum from our shares aside just in case of contingencies - because we sorted the entire estate really fast - so it felt almost too easy.