Tax implications of recieving estate income

Bobziz

Hi,

I'm looking for help in understanding how savings interest might be taxed if I also receive a one-off payment of estate income from my late mother's estate.

I understand that if I were to earn up to £12,570 I would have the full SRFS and PSA available. However, if I were to receive say £20k estate income which the estate had already paid tax on, how would this impact any savings interest allowance I might have ? 

Many thanks,

Flugelhorn

Is the income from mother's savings? Is it still in name of the exec and hence part of the estate? 

if so then it would just be part of inheritance to you and remains income for the estate (for which exec would have to do a tax return I thinnk)

Keep_pedalling

Any payment from the estate to a beneficiary that has already been taxed is going to be treated as a partial distribution not income so you have no more tax to pay on it.

Why has the estate not been distributed yet?

Bobziz

Thanks @Flugelhorn. Yes its estate income that the exec will pay tax on. However, it's my understanding that if my taxable income were either below or above the basic rate, then I could claim some of that tax back or indeed I would need to pay more. Does this therefore mean that the estate income I receive also impacts on my savings interest allowances and if so how ?

Bobziz

Keep_pedalling said:

Any payment from the estate to a beneficiary that has already been taxed is going to be treated as a partial distribution not income so you have no more tax to pay on it.

Why has the estate not been distributed yet?

Thanks. I was referring to this https://www.litrg.org.uk/tax-nic/trusts-and-estates/bereavement-tax-issues-death/tax-income-and-gains-after-death

Because of the nature of the assets in the estate there was always going to be estate income generated and a tax return required.

The estate has not been distributed yet because we're waiting for HMRC to confirm any income tax due before death. The beneficiaries are also still taking idependant finical advice so that they're ready to receive their inheritance. The estate assets are generating a decent return too, so nobody's in any hurry.

Sarahspangles

Bobziz said:

Hi,

I'm looking for help in understanding how savings interest might be taxed if I also receive a one-off payment of estate income from my late mother's estate.

I understand that if I were to earn up to £12,570 I would have the full SRFS and PSA available. However, if I were to receive say £20k estate income which the estate had already paid tax on, how would this impact any savings interest allowance I might have ? 

Many thanks,

In similar circumstances in our family, it helped the beneficiaries to understand that the estate is like a person with their own tax affairs until the estate is settled. Tax should already have been paid on money that is distributed to beneficiaries. In fact there’s a certificate that is issued to confirm that the tax has been paid.

Once the beneficiary receives the money then they can use their own allowances to reduce the tax due, (I.e. going forward) assuming they have some unused allowance.

If the distribution of funds in a savings account takes place quickly, a beneficiary with spare allowance may pay less tax that the estate would have, and hence all the beneficiaries would get a little bit more. But I don’t think an executor should prioritise this over an orderly processing of the estate.

Bobziz

Thanks all. This suggests that the estate income received by the beneficiary's will impact upon their PSA doesn't it ? 

My question is not whether the beneficiaries will need to pay more tax, it's whether the estate income received by them will also count as their income in relation to them being able to use their own PSA and SRFS allowances on their own savings interest? Apologies if I'm being thick here.

 https://www.litrg.org.uk/tax-nic/trusts-and-estates/paying-tax-trust-and-estate-income#5

sheramber

Income from come from an estate means that you are receiving income that has been generated by the estate. Such if the estate owned rental properties and the rental profit was given to you.

Getting a lump sum payout when an estate is finalised and proceeds are distributed to the beneficiaries is not estate income. It is capital that you inherit.