Reporting estate income - letter vs SA900/SA903?

tinyGiraffe

My mother died in January 2024, and I and my sister are (amongst others) the beneficiaries and executors of her estate. She left behind a some money and a house which was rented out to help pay for her care home fees. As we did not know how long probate would take (surprisingly quick, as it happened) we renewed the tenancy and as the house was still in my mothers name, the estate has had income. In August 2025 the tenants left and we sold the house in Sept 2025.

HMRC had sent me a tax return SA900 for April 2023 to the date of her death, 22 Jan 2024, which I filled in, returned and paid.

For the remainder of that tax year January 2024 to April 2024, I was advised via the helpline that I could send in an informal letter, as tax due on the income was below £10k, which I did. I heard nothing back, and it came to light when I rang the helpline again in December that the letter had not even been read. 

The house has been sold in Sept 2025 for more than the estimated probate value. As the house was sold for more than £500k I have registered the estate and have a UTR for the estate itself.

I now need to pay from the estate before finally distributing the assets:

1: income tax return for the full year Apr 2024 - Apr 2025. 

2: income tax for the part year Apr 2025 to date of house sale Sep 2025 after which there is no more income.

3: CGT for the value of the house sale above the probate value.

Question1: As the tax due for income in 24-25 is less than £10k I could write another letter, work out what I think is the tax and pay it using the estate UTR. I assume that I cannot finish distributing assets until HMRC confirm that the correct amount has been paid. Given that its nearly a year and no-one has come back to me on my first letter, this could drag on for quite a while. Should I simply do an SA900 (Self assessment for Estate Income) & SA903 (property income) as it seems that forms are dealt with more quickly than letters?

Question 2:  On the helpline, I was told that I need not do the CGT until the tax return for 25-26. I think this is incorrect as I see no evidence that estates are not subject to the 60-day rule. So using the new UTR, should I just do the CGT online now? It is possible I misunderstood the help line person, and he meant I should do the CGT now and declare it on the SA900+other pages. Does this sound like the best course of action?

I'm keen to get this executorship wrapped up as soon as possible, while not falling foul of HMRC, not inviting fines from the slow processing of letters, and not spending hours listening to hold music. 
TIA.

poseidon1

You were wrongly advised.

The £10k threshold for informal reporting of estate tax affairs is for all taxes including capital gains. Furthermore the letter is only sent at the end of the estate administration period, which in your case was the property sale in September.

Now if both income and capital gains tax are below the £10k threshold, theoretically you could try again with the informal letter approach.

However, I would not risk it, especially since you have only 60 days after the property sale to report and pay that tax due -  there is a separate online system for this link below -

https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-sold-a-property-in-the-uk-on-or-after-6-april-2020

Accordingly, in your shoes I would do the following:

1) Print off and complete an Estate tax return SA900 for 2024/25

2) Amend another SA900 to show the 2025/26 tax year, detailing income tax  and CGT to September 2025 which you will indicate as being the effective estate administration termination date.

3) Sign and date both and send off together with covering letter, to await HMRC raising  assessments for the net amount of taxes due after credit for the CGT you pay up front ( you are right not to delay this, estates are not exempt from the 60 day deadline).


Finally do not overlook the fact that the estate beneficiaries may have additional tax liabilities on the cumulative estate income received since date of death. If there were no interim estate distributions to beneficiaries in the 2024/25 tax year, then their shares of the entire net estate income is reportable by them in the current tax year of distribution.

You will need to prepare and circulate estate R185s per link below -

https://assets.publishing.service.gov.uk/media/65e5aeb57bc329e58db8c1b9/R185Estate-Income.pdf

Hopefully by submitting formal estate tax returns, your compliance will be handled sooner rather than later by HMRC.

 Indeed it has been observed on this forum,  that there are long HMRC delays in dealing with informal letters, such delays no doubt  being compounded if others like yourself are being given duff advice by HMRC concerning how  the £10k threshold operates.

tinyGiraffe

Thanks so much poseidon1, this sounds like very solid advice and a good plan. I will definitely follow your 1,2 and 3, within the 60 days.

To be clear, you are saying pay the CGT now, but wait until the income tax forms for both years are assessed and a bill arrives? I believe that the CGT can be done online, which should speed things up a bit.

I did have a very difficult time finding out when the period of administration actually ends. There is no end of conflicting "advice". Best I could find was something along the lines of "when all assets have been settled". To my mind this would be when the money from the house sale and savings have been distributed, but do you think I should use the house sale completion date? I intend to distribute the majority if the money as quickly as possible, which means probably in the next two weeks, keeping some back in case HMRC take a different view on my calculations and for the income tax assessment.

Finally do not overlook the fact that the estate beneficiaries may have additional tax liabilities on the cumulative estate income received since date of death.

I'm a bit confused how this might be. As the estate owned the house, the estate is paying the income tax on the rent. How would the beneficiaries be liable? As it happens, we did have an interim payout in the last tax year which was greater than the income from the estate.

The money from the house sale arrived last week in the account, which is not one that bears interest. Another reason to get the distribution done asap.

I've not heard of an R185 before but will look at the link you have so kindly provided. The other three beneficiaries are Australians who do not live in the UK and have no income from here. Would I still have to do the R185s? 

Once again thanks for your advice.

poseidon1

Your 1st point  - yes completing CGT on line and pay the tax ASAP , gets you into the system and gains HMRC attention. Quickly  follow that up with both tax returns as suggested, with the last return similarly reporting the property gain you will do online ( its  requirement to report the property gain on the return as well as the prior online process).

As for termination of estate administration, as long as you are confident no stray creditor will emerge from the woodwork, and by selling the property you are now on the cusp of finalising matters,  then the completion  date of the property sale is as good  a ruling off point as any, especially if all monies are now  non interest bearing.


As for the beneficiary personal tax position on receipt of taxed  estate income, the following article explains


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


You can be forgiven for being unaware of this. It is my impression that very few non professionals  are aware and I have no doubt  a great many  DIY executors have wound up estates in ignorance of their duty in this regard. 

As for the Australian beneficiaries they are liable to tax on a world wide basis including on  'attributed income from foreign entities'. In this case rolled up estate income included in their distributions - 


https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/foreign-and-worldwide-income/australian-resident-foreign-and-worldwide-income

By supplying them with appropriate R185s for the two tax years, they can claim credit for UK tax paid at source, against any Australian  higher rates they maybe liable to.  

A  tedious and time consuming task on top of everything else  you have had to deal with. 

tinyGiraffe

Once again, many many thanks for your full reply Poseidon1. I really don't think I would have found this information anywhere else. 

I have the figures all collected so filling in the forms shouldn't be too difficult....better just get on with it.