how to declare interest received after probate final accounts

My father has received a further payment from the solicitors who dealt with my mothers probate.  He received what we thought was the full amount due to him weeks ago following the completion and signing off of the final accounts but now they have sent him a letter saying extra interest has come to light an they have made a futher payment of £770 to him but he should declare this to HMRC himself and pay the income tax due.

How does he go about this? He only a state pension as an income so has never done a self assessment tax declaration or had any online account with HMRC.

Apologies in advance if I don't get back to this thread to reply very quickly - grandchildren are staying and moments to yourself are hard to find!

Comments

  • If the solicitors are saying he is responsible for any tax due rather than the estate then he does not have to do anything as no IT will be due on it unless he has a lot more interest coming in from elsewhere. To start with as a basic rate tax payer he has £1000 interest allowance, and as a low income earner he can also earn up to an additional £5000 tax free under the starting rate rules.

    https://www.gov.uk/apply-tax-free-interest-on-savings

  • from what I understand, it is the amount of interest earned whilst in the solicitors client account, therefore the estate should have paid it before distribution as a deceased person has no tax allowance at all.  As it wasn't paid, he is now liable for it.
  • from what I understand, it is the amount of interest earned whilst in the solicitors client account, therefore the estate should have paid it before distribution as a deceased person has no tax allowance at all.  As it wasn't paid, he is now liable for it.
    Client accounts don’t tend to be interest bearing this is more likely to be a payment from your mother’s savings account.
  • This is a tricky area, as any interest earned on the estate during the administration period is taxable if more than £500, advice on .gov is as follows: 
    If the only income the estate received during the administration period was from bank account interest and that was less than £500, you do not need to report the estate to HMRC.
    full link here https://www.gov.uk/probate-estate/reporting-the-estate
  • Thanks for the comments. About £1000 of interest was initially earned during the administration and this was detailed on the final account along with confirmation that +/- £200 had been paid to HMRC by the solicitors (exact figures rounded up) before distribution. 

    The second payment of £770 was directly into his bank account and came several weeks after distribution initially with no explanation.  I emailed the solicitors to find out why and I had a brief email back saying some additional client interest was posted after finalising the estate accounts, it was paid gross, before deduction of income tax and should be declared to HMRC.  

    I did ask the solicitors how to declare it but they haven't replied - either due to not being there over the Christmas period or more likely, they have had their money and are not going to give any more free advice.

    I will phone HMRC in the new year if all else fails, but hoped it might be a case of just filling in a form and if that was the case, someone here might have known which form it was.
  • HHarry
    HHarry Posts: 863
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    I wrote a letter to HMRC saying “My Mums estate earned this much in interest / dividends / capital gains during the administration process and I owe you £x”  They replied saying “We calculate you owe…..” and repeated my figures and gave details of how to pay.

    It was pretty simple - I’ll try and see if I can find the address I used, but it was 5 years ago.
  • JGB1955
    JGB1955 Posts: 3,434
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    HHarry said:
    I wrote a letter to HMRC saying “My Mums estate earned this much in interest / dividends / capital gains during the administration process and I owe you £x”  They replied saying “We calculate you owe…..” and repeated my figures and gave details of how to pay.

    It was pretty simple - I’ll try and see if I can find the address I used, but it was 5 years ago.
    I did the same, sending all correspondence to 

    HM Revenue and Customs
    PAYE & Self Assessment
    BX9 1AS 


    #2 Saving for Christmas 2024 - £1 a day challenge. £131 of £366
  • OK. Thanks.  I'll do that and see what happens.
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