Beneficiary reporting interest to hmrc

mybestattempt

retroman62 said:

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. 

Unfortunately, not all frontline/helpline HMRC advisors understand the official guidance and the legislation which underpins it; so yes what you were told was wrong about premium bonds winnings.

As for property and shares if they are later sold for more/less than the declared IHT value at date of death then there will be capital gains/losses.