What tax is payable on a single life annuity that is paid after death

Notepad_Phil

A relative of mine died earlier this year and although every company was contacted as soon as possible, there was obviously not enough time for some company processes as a couple of single life annuities were paid out in the month after death.

I had thought that these companies would write asking for the money to be paid back, but we've heard nothing after nearly 6 months, so I'm currently assuming that once the estate administration period has completed then these annuities will need to be added onto what is reported to the hmrc for a 'simple' estate, i.e. as per the "Reporting on ‘simple’ estates" section of https://www.gov.uk/probate-estate/reporting-the-estate .

However I'm not sure what income tax values would be put for the annuities. One was paid with 20% already paid, whilst the other was paid tax-free due to its tax code. I'm thinking that the details of both annuities should be added onto the letter, but put income tax of £0 for the one already taxed, and then put the second with the income tax of 20% of the payment.

Does that sound right?

Fortunately there is time to figure this out as it is likely to be many months away as we're still waiting for probate to be granted and then we're likely to have some problems when selling the house, but I would like to get this sorted whilst not under any time pressure.

p.s. the hmrc have told us that we do not need to do a tax return for my relative for the 2022-23 tax year, which is helpful, but I assume these two annuities would not have fallen into that anyway.

Many thanks

Marcon

Notepad_Phil said:

A relative of mine died earlier this year and although every company was contacted as soon as possible, there was obviously not enough time for some company processes as a couple of single life annuities were paid out in the month after death.

I had thought that these companies would write asking for the money to be paid back, but we've heard nothing after nearly 6 months, so I'm currently assuming that once the estate administration period has completed then these annuities will need to be added onto what is reported to the hmrc for a 'simple' estate, i.e. as per the "Reporting on ‘simple’ estates" section of https://www.gov.uk/probate-estate/reporting-the-estate .

However I'm not sure what income tax values would be put for the annuities. One was paid with 20% already paid, whilst the other was paid tax-free due to its tax code. I'm thinking that the details of both annuities should be added onto the letter, but put income tax of £0 for the one already taxed, and then put the second with the income tax of 20% of the payment.

Does that sound right?

Fortunately there is time to figure this out as it is likely to be many months away as we're still waiting for probate to be granted and then we're likely to have some problems when selling the house, but I would like to get this sorted whilst not under any time pressure.

p.s. the hmrc have told us that we do not need to do a tax return for my relative for the 2022-23 tax year, which is helpful, but I assume these two annuities would not have fallen into that anyway.

Many thanks

Yes.

If the annuities were being paid in arrears, then paying them in the month after death also sounds 'right'.

Notepad_Phil

Marcon said:

Notepad_Phil said:

A relative of mine died earlier this year and although every company was contacted as soon as possible, there was obviously not enough time for some company processes as a couple of single life annuities were paid out in the month after death.

I had thought that these companies would write asking for the money to be paid back, but we've heard nothing after nearly 6 months, so I'm currently assuming that once the estate administration period has completed then these annuities will need to be added onto what is reported to the hmrc for a 'simple' estate, i.e. as per the "Reporting on ‘simple’ estates" section of https://www.gov.uk/probate-estate/reporting-the-estate .

However I'm not sure what income tax values would be put for the annuities. One was paid with 20% already paid, whilst the other was paid tax-free due to its tax code. I'm thinking that the details of both annuities should be added onto the letter, but put income tax of £0 for the one already taxed, and then put the second with the income tax of 20% of the payment.

Does that sound right?

Fortunately there is time to figure this out as it is likely to be many months away as we're still waiting for probate to be granted and then we're likely to have some problems when selling the house, but I would like to get this sorted whilst not under any time pressure.

p.s. the hmrc have told us that we do not need to do a tax return for my relative for the 2022-23 tax year, which is helpful, but I assume these two annuities would not have fallen into that anyway.

Many thanks

Yes.

If the annuities were being paid in arrears, then paying them in the month after death also sounds 'right'.

Good thought about it perhaps being paid in arrears, I have to admit I hadn't thought of that possibility - though if it's not then I did find this in the iht tax manual https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm17055

Any pension payments made after death because the pension scheme provider was not aware of the death are not part of the estate. These payments are repayable to the provider although small overpayments may occasionally be written off.

Ex-gratia payments made by a pension scheme provider are not taxable as they are not paid under any legal obligation and the beneficiary has no entitlement to a payment