Beneficiary reporting interest to hmrc

mybestattempt

@Nettiemc3

I've done more reading on this and it appears for years before 2024/25 a report to HMRC is not needed it the only estate income was bank interest of less than £500:

https://www.gov.uk/probate-estate/reporting-the-estate

Could it be when the estate income is allocated to each relevant tax year no reporting HMRC is needed?

poseidon1

Nettiemc3 said:

thank you everyone for your replies, I’m not sure how I reply to individual posts, sorry 
I feel totally lost with this at the moment and will need to sleep on the info given, just as a more in depth explanation, my father passed away 18 months before my mum September’21, I went with the solicitors firm who did their wills, my dads half of the house went into trust for beneficiaries and a sum of money kept back for expenses and when my mum passed, I stayed with the same solicitor as I didn’t know any better and was in quite a bad way emotionally, she was the administrator and I believe my brother and myself executors, she took control over closing accounts, dealing with utilities etc, even though I offered to do this, I couldn’t even contact the local council as they were charging for council tax before probate, apparently as there was a trust ( my dads trust) there was a source to fund this, I think I would have put up a fight, but I no longer had any control
A few weeks after the house sold, my dads share was released, she said she had to deal with my mums separately as she had to send info to HMRC so it will take longer, I did mention in conversation that I do my own self assessment, (none of the other beneficiaries do) and mentioned that I need closure ( for my mental health), my brother and I received the folder and had to sign to say we agreed with the figures, which I didn’t dispute and believed everything was in order as the estate had paid for these services to closure/ finalisation, also all beneficiaries had to acknowledge receipt, nobody received a R185, this all happened just before Christmas ‘24
the interest income was over £1000 that came from savings accounts, ISA interest and premium bond winnings 
I think my next step is to go back to solicitor as recommended for the R185’s, she became less approachable, the closer we came to the end, so hopefully I get the results I need 
many thanks 

If the £1000 figure does include isa interest, that needs to be stripped out. Isa income remains tax free for up to 3 years after death ( which the solicitor again should have known).  Premium bond winnings are tax free, period.

If the solicitor did not provide a break down of categories of income into tax years then get her to do so. If after stripping out the isa income and premium bond winnings the  remaining bank interest is less than £500 in each tax year than it is tax free at estate level and remains so for the receiving beneficiaries, in which case despite the solicitors exhortation to the contrary none of you will have anything to report.

Nettiemc3

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

poseidon1

Nettiemc3 said:

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

Sorry the 'simple estate' income tax reporting procedure is what the solicitor was supposed to have used as an alternative to submitting  the formal estate tax return SA 900.

If you don't feel  inclined to get the solicitor to issue the R 185s, you can of course try and do this by letter. However, make a specific point in the letter of giving the name and address of the solicitor who instructed you to do this. Be interesting to note HMRCs reaction to the departure from the established procedure the solicitor has forced upon you.

retroman62

poseidon1 said:

 Premium bond winnings are tax free, period.

True, but my understanding is that, technically,  winnings (in the 12 months after death`) have to be taken into account in the value of the estate. Probably academic, unless the estate is over the IHT threshold and IHT has been paid.
https://www.theguardian.com/money/2002/mar/21/finance.inheritancetax

mybestattempt

retroman62 said:

poseidon1 said:

 Premium bond winnings are tax free, period.

True, but my understanding is that, technically,  winnings (in the 12 months after death`) have to be taken into account in the value of the estate. Probably academic, unless the estate is over the IHT threshold and IHT has been paid.
https://www.theguardian.com/money/2002/mar/21/finance.inheritancetax

Apart from being over 22 years old that article is wrong.

IHT is calculated on the value of the estate at date of death, which would include the amount of premium bonds held at the date of death.

Any winnings on those PBs retained for 12 months after the date of death are (non taxable) income of the estate during the period of administration.

poseidon1

retroman62 said:

poseidon1 said:

 Premium bond winnings are tax free, period.

True, but my understanding is that, technically,  winnings (in the 12 months after death`) have to be taken into account in the value of the estate. Probably academic, unless the estate is over the IHT threshold and IHT has been paid.
https://www.theguardian.com/money/2002/mar/21/finance.inheritancetax

Notwithstanding the nonsense in the 2002 Guardian article, there is no one year period  after death whereby premium bond winnings can become liable to IHT.

The appropriate date ( post death) is the winning bond draw date relative to date of death - at most a few days depending on the quantum of winnings, see link to  HMRC manual below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm10082

The fact that an estate can continue to participate in the premium bond draw up to 1 year post death, does not of itself make all bond winnings over that period IHT liable.

Nettiemc3

poseidon1 said:

Nettiemc3 said:

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

Sorry the 'simple estate' income tax reporting procedure is what the solicitor was supposed to have used as an alternative to submitting  the formal estate tax return SA 900.

If you don't feel  inclined to get the solicitor to issue the R 185s, you can of course try and do this by letter. However, make a specific point in the letter of giving the name and address of the solicitor who instructed you to do this. Be interesting to note HMRCs reaction to the departure from the established procedure the solicitor has forced upon you.

poseidon1 said:

Nettiemc3 said:

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

Sorry the 'simple estate' income tax reporting procedure is what the solicitor was supposed to have used as an alternative to submitting  the formal estate tax return SA 900.

If you don't feel  inclined to get the solicitor to issue the R 185s, you can of course try and do this by letter. However, make a specific point in the letter of giving the name and address of the solicitor who instructed you to do this. Be interesting to note HMRCs reaction to the departure from the established procedure the solicitor has forced upon you.

Just to update, I contacted a very helpful person at HMRC, he also was shocked that this had been left for us to do, he said that each beneficiary needs to notify HMRC of their NI number and the share received, I did a template for all involved to fill in their own details, I’m sending 5 of the 6 (one brother is further away) today, I did mention about the solicitor, but yes may be a good idea to add their details 
Thank you

poseidon1

Nettiemc3 said:

poseidon1 said:

Nettiemc3 said:

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

Sorry the 'simple estate' income tax reporting procedure is what the solicitor was supposed to have used as an alternative to submitting  the formal estate tax return SA 900.

If you don't feel  inclined to get the solicitor to issue the R 185s, you can of course try and do this by letter. However, make a specific point in the letter of giving the name and address of the solicitor who instructed you to do this. Be interesting to note HMRCs reaction to the departure from the established procedure the solicitor has forced upon you.

poseidon1 said:

Nettiemc3 said:

Inheritance form IHT 400 submitted in August ‘23, no queries raised by HMRC in relation to estate and figures reported
regarding interest income, unfortunately the bulk of interest was accrued in a savings accounts up to the date of my mum passing and then acknowledged when the accounts were closed during the admin period, they total more than £1000 even with me excluding ISA interest and premium bond winnings, so this is obviously over the £500 non reporting, with the link sent earlier, there was a section to report a *simple estate* which appears to fit with what I need to report
i will probably go down both routes if needed, I will contact HMRC via the details given and if no joy or if given instruction to do so will get back to the solicitor with the reasons from HMRC
The service I received from this firm was at considerable cost, but wanted everything to be correct and so I could sleep at night, I really need to update my own Will, I don’t want my children to have the same issues, so I really need to think how I approach things going forward 
Many thanks to all

Sorry the 'simple estate' income tax reporting procedure is what the solicitor was supposed to have used as an alternative to submitting  the formal estate tax return SA 900.

If you don't feel  inclined to get the solicitor to issue the R 185s, you can of course try and do this by letter. However, make a specific point in the letter of giving the name and address of the solicitor who instructed you to do this. Be interesting to note HMRCs reaction to the departure from the established procedure the solicitor has forced upon you.

Just to update, I contacted a very helpful person at HMRC, he also was shocked that this had been left for us to do, he said that each beneficiary needs to notify HMRC of their NI number and the share received, I did a template for all involved to fill in their own details, I’m sending 5 of the 6 (one brother is further away) today, I did mention about the solicitor, but yes may be a good idea to add their details 
Thank you

It's helpful HMRC have assisted you and your fellow beneficiaries in dealing with your respective income tax obligations, but clearly the idiot solicitor has lumbered you with the job you all paid her to do!

Worse still, this is no doubt her usual modus operandi so she will continue this nonsense with other estates unless her shortcomings are highlighted sooner rather than later.

retroman62

poseidon1 said:

retroman62 said:

poseidon1 said:

 Premium bond winnings are tax free, period.

True, but my understanding is that, technically,  winnings (in the 12 months after death`) have to be taken into account in the value of the estate. Probably academic, unless the estate is over the IHT threshold and IHT has been paid.
https://www.theguardian.com/money/2002/mar/21/finance.inheritancetax

Notwithstanding the nonsense in the 2002 Guardian article, there is no one year period  after death whereby premium bond winnings can become liable to IHT.

The appropriate date ( post death) is the winning bond draw date relative to date of death - at most a few days depending on the quantum of winnings, see link to  HMRC manual below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm10082

The fact that an estate can continue to participate in the premium bond draw up to 1 year post death, does not of itself make all bond winnings over that period IHT liable.

Well I would agree that the HMRC manual would suggest otherwise, but this was not what the relevant department told me (in 2022, so rather more recent than the Guardian article I uploaded earlier) when I was acting as an Executor on an estate. I pressed them in a telephone call on the specific point of winnings in the 12 months after death, and they confirmed to me that whilst the winnings themselves were tax free, they had been earned on assets which the deceased held at the time of death, and should therefore be added to the value of the estate for IHT purposes. Sort of akin to a house or shares which are valued at the time of death for IHT purposes but which then sells for a different price after probate  - in those circumstances either more IHT is payable or a refund is due (if IHT has been paid in the first place).  

Personally I get where you’re coming from on your logic, and perhaps what they said to me was nonsense as well, but nonetheless they were clear that it had to be taken into account.