Premium bond winnings in 'simple estates'

Hector66

Hi all

I am executor for a late relative and am now at the end of the estate administration process. I am trying to determine whether I need to report and pay income tax to HMRC under the 'simple estates' process. HMRC's guidance on gov.uk (https://www.gov.uk/probate-estate/reporting-the-estates) states:

"Up to 5 April 2024, if the only income the estate received during the administration period was from bank account interest which was less than £500, you do not need to report the estate to HMRC.

From 6 April 2024, if the estate’s income from any sources is less than £500, you do not need to report the estate to HMRC.

The £500 tax-free amount applies:

• for every tax year of the administration period, but you cannot carry over unused amounts from one year to the next

• to all types of income, except ISAs, which continue to be exempt from Income Tax or Capital Gains until the estate is closed or up to 3 years after the person’s death."

During the administration period the estate received £295 bank interest plus a £22 dividend, so less than the £500 income level for reporting to HMRC. However, the estate has also received Premium Bond prizes of £600. Does anyone know whether these Premium Bond winnings need to be treated as additional income and so taking the total income over HMRC's £500 level for reporting, or are the Premium Bond winnings not treated as income because they are not subject to income tax (akin to ISAs)?  

I've posted the question on HMRC's forum but it's been awaiting moderation and posting for some time, so I've had no reply. 

Many thanks all.

Keep_pedalling

PB winnings are always tax free so no need to report.

Hector66

Many thanks for replying @Keep_pedalling. It's not so much about PBs being tax free. Rather it's whether PB winnings (notwithstanding their tax-free status) are nevertheless classed as 'income' for the purposes of determining whether the estate's overall level of income received during the administration period has exceeded £500. 

Because HMRC's guidance explicitly excludes ISAs from their definition of income but does not explicitly exclude PB winnings, a literal interpretation would be that you do have to include PB winnings as part of your total income, even though such winning would not be taxable. If so, that would mean the total reportable income of the estate I am dealing with would exceed £500, and I would have to report and pay the income tax on the bank interest and dividend, albeit not on the PBs. Alternatively if PB winnings are not classed as income, then the total estate income would be under £500 and I wouldn't have to report and pay the income tax on the interest and divi. This latter scenario feels correct intuitively, but looks incorrect literally (based on HMRC's page).

Any further thoughts gratefully received.      

Keep_pedalling

No they are not classed as income. 

Hector66

Thanks @Keep_pedalling.