Executor Accounts & HMRC

sheffix2

While administering my late father's estate I found it difficult to set up special executor accounts and was told it wasn't necessary. I did set up an account with NS&I in my name and called it "Executor Account" in to which I transferred my father's NS&I accounts as they were closed. This account has subsequently accrued interest in the time taken dealing with his estate & I've contacted HMRC to ask how I go about paying the 20% tax on his interest. I'm awaiting their instruction on this. I am hoping to distribute shortly to the residuary beneficiaries and will hold back a sum which I believe will cover the tax on the interest since my Dad's death. Obviously I have documented all dealings in this account. My question is, although used purely as an account dealing with my Dad's estate it is in my name so how do I ensure I am not personally liable for tax assuming NS&I will inform HMRC of interest accrued? Has anyone had experience of this and how they dealt with it? Thanks for your help.

doodling

Hi,

You are personally liable as executor to pay tax on any income earned by the estate (subject to any rules applicable to the taxation of income from estates which are slightly different to those applicable to living people).

BUT

That tax should be paid from the estate.  The finances of the estate should not have any impact on the amount of tax you pay personally (the rules are designed to ensure that the personal taxation of executors / trustees is not affected by them carrying out those roles (which is a good thing - imagine if you were the trustee of a multi billion pound pension scheme - you wouldnt want that appearing on your own tax return!)).

sheffix2

Thanks for replying. I am currently in the process as executor of having written to HMRC declaring the interest earned by the estate since Dad's death & awaiting instruction on how to pay. (That was over a month ago. I was told I need a reference number first) My concern is if NS&I report the interest earned as my own since the account is in my name & they report it to HMRC who will look to collect personal taxation from me resulting in the amount being taxed twice. How do I avoid this?

doodling

Hi,

sheffix2 said:

Thanks for replying. I am currently in the process as executor of having written to HMRC declaring the interest earned by the estate since Dad's death & awaiting instruction on how to pay. (That was over a month ago. I was told I need a reference number first) My concern is if NS&I report the interest earned as my own since the account is in my name & they report it to HMRC who will look to collect personal taxation from me resulting in the amount being taxed twice. How do I avoid this?

If this happens then you need to declare that the income was received as part of an estate, not in your personal capacity.  It helps if you can evidence that the estate has already paid the tax on it (or that tax is not due).

You may end up having to fill out a tax return to get the tax back.

Have you checked that NS&I Ts&Cs permit their accounts to be used to hold funds held in trust (I think they do but it is worth being sure)?  Normally it doesn't matter as breaching the Ts&Cs of a bank is just a contractual matter but as both HMRC and NS&I are both arms of government they may look out for each other.

Notepad_Phil

These links may be of use, they deal with what should happen both with any interest and dividends that may come into the estate and importantly how the residual beneficiaries then deal with those payments.

https://www.gov.uk/probate-estate/reporting-the-estate
https://www.gov.uk/probate-estate/distribute-the-estate
https://www.gov.uk/tax-property-money-shares-you-inherit/money-and-shares

https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death
https://www.litrg.org.uk/tax-nic/trusts-and-estates/paying-tax-trust-and-estate-income

Claude_and_Eustace

I have this issue but with Capital Gains Tax. I managed to speak to someone at HMRC (eventually!) who assured me that as long as I report the CGT to HMRC then it will not be entangled with my own allowance. I am administering a simple estate so just need to informally report, in case that makes a difference.  I did make a note of the date and time off the phone call. But as you also found, it is difficult to find an executor account nowadays so they must be used to this. 

Shedman

I am looking at the same issue.  My concern would be that if they initially treated the tax on interest as being to my personal account then it could increase my total taxable income into the 40% tax bracket with knock on effects.  Claude_and_Eustace's assurance from HMRC just seems a bit too informal to provide sufficient confidence that there won't be complications.

Has anybody opened an Executor account that pays interest or the same bank allows an interesting bearing saving account also to be opened as an Executor as that would hopefully overcome my concerns?

polar_pig

Yes, I've opened a Cater Allen account:

https://forums.moneysavingexpert.com/discussion/comment/80671881/#Comment_80671881

bobster2

I have completed the process using a regular account in my name. Did a tax return for the estate - reported interest for the "executor account" during the period of administration there. Did my own self-assessment tax return - reported interest for my other accounts (some with same bank) there.

When reporting interest on a tax return - you don't have to name the accounts or give account numbers (I suppose unless you're audited in some way). So there have been no queries or anything like that.

The only way I can see a query being raised would be if HMRC were routinely trawling through all bank account interest data.

If asked it would be easy to prove I've reported all interest on one or other tax return. As the "trustee" of the temporary will trust that exists during the period of administration - I had to register this and give my NI number as part of that process. 

Hoenir

Shedman said:

Has anybody opened an Executor account that pays interest or the same bank allows an interesting bearing saving account also to be opened as an Executor as that would hopefully overcome my concerns?

There's no accounts that pay interest as far as I am aware. When dealing with my late parents estates I made number of interim distributions to the beneficiaries. Retaining a float to cover any potential outgoings the estates might incur. 

polar_pig

The Cater Allen executor account pays 4.5% AER and is a 35 day notice account that you can have with their executor current account. See my link in my post above for more details, or look here:

https://www.caterallen.co.uk/accounts/specialist-banking/solutions-for-executors-and-personal-representatives/personal-notice-35-account-for-executors-and-personal-representatives