In addition to the many legal responsibilities of executors/personal representatives or administrators (where the deceased died intestate) of a person’s death estate – which our sister business, RRL Probate can assist with – they are responsible for all the tax reporting requirements. These requirements apply to both the estate and the deceased individual.

There is a lot of confusion when it comes to the different entities that have separate tax positions and tax reporting requirements, when someone dies. As well as different taxes to consider. The aim of this briefing note is to attempt to broadly clarify the position.

Whether you need help with inheritance tax, probate, or ongoing estate matters, our probate specialists and tax advisors are here to help.

Inheritance Tax, Probate & Estate Administration

Executors/personal representatives or administrators are responsible for dealing with the inheritance tax reporting (if required), application to the Court for the Grant of Probate and the transfer of assets to relevant beneficiaries, as set out in the deceased individual’s death. Executors/personal representatives or administrators can appoint a solicitor (such as RRL Probate) to assist in dealing with these matters.

In general, inheritance tax (IHT) is charged at 40% on the chargeable value (net of IHT reliefs and exemptions) of chargeable assets and the chargeable value of lifetime gifts made by the deceased within the final 7 years of their life above the available nil-rate bands. A lower rate of 36% may be applicable if at least 10% of the net estate is left to a registered charity in the Will.

Professional advice could be sought (and we’d strongly suggest that it was) to review and advise on the availability of reliefs (Business Property Relief and Agricultural Property Relief), exemptions and nil-rate bands (standard, residential and any transferable from a previously deceased spouse). The position is complex and it is advisable to seek experienced, specialist tax advice here.

The position will be further complicated by upcoming IHT changes such as changes to Business Property Relief and Agricultural Property Relief from April 2026 and the removal of the IHT exemption for pension funds on death from April 2027.

IHT is due by the end of the sixth month after death. Interest is charged on unpaid amounts after that date.

If the IHT relates to land/property or shares, it is possible elect to pay the tax in instalments over 10 years. If cash is not available, payment plan arrangements can be applied for with HMRC. Interest is still payable is the tax is paid in instalments or via a payment plan arrangement.

Claims can be made to reduce IHT liabilities at a later date where land/property or certain “qualifying investments” (namely shares and securities listed on a recognised stock exchange, UK government stock or holdings in unit trusts) are sold for a lower amount than the amount they were originally valued at. This is often not appreciated and can be extremely valuable.

How a Tax Advisor Can Help

A qualified chartered tax advisor can:

• Identify available reliefs such as Business Property Relief (BPR) and Agricultural Property Relief (APR)
• Ensure all nil-rate bands are applied correctly
• Review lifetime gifts and exemptions
• Help minimise inheritance tax liabilities legally

With upcoming legislative changes, including reforms to reliefs and pension treatment, working with a specialist tax advisor is more important than ever. Get in touch with one of our tax specialist today.

Income Tax & Capital Gains Tax After Death

From a tax perspective, there are three distinct periods to consider following death:

1. The period to the date of death – Taxable income and capital gains are reported on the late taxpayers’ personal self-assessment tax return.
2. Period from the date of death to the end of the administration period – Broadly this is before the assets have been put into the relevant beneficiaries’ names to own personally – the income and capital gains need to be reported by the Estate itself.
3. The period following the end of the administration period – The income and capital gains realised need to be reported by the beneficiaries on their self-assessment tax returns (if relevant).

Following the death of the deceased, the executors/personal representatives or administrators are responsible for ensuring the tax affairs under 1 and 2 are in order and can appoint an accountant/tax advisor (such as us/RRL) to assist with this.

The tax affairs under 3 are responsibility of the individual beneficiaries (not the executors). Again, they can appoint an accountant/tax advisor (such as our tax advisors at RRL) to assist with this.

Period to the date of death

The executors are responsible for ensuring that the personal tax affairs for the deceased individual are in order up to the date of death.

Any taxable income and capital gains arising in the period from 6 April up to the date of death will need to be assessed and reported via a self-assessment tax return (or a disclosure process with HMRC in the event that taxable income and/or capital gains have not been correctly declared to HMRC for tax years where it is no-longer possible to file a tax return), if required.

HMRC can look back to the 6 tax years up to the date of death and it may therefore be necessary to review these years.

Period from the date of death to the end of the administration period

Income and capital gains arising during the administration period i.e. post the death of the deceased but before assets are transferred to beneficiaries, are taxable within the estate itself.

Income is subject to income tax at the basic-rates of income tax – irrespective of the level of taxable income. This is unless the income does not exceed £500 in total – in which case there is no income tax liability nor reporting requirement.

The rate of capital gains tax payable on gains realised by the estate (normally calculated as net sale proceeds less the market value at the date of death) is 24%.

The tax reporting for the estate depends on whether the estate will be required to register, as a so-called “complex estate,” which is required if either of the following apply:

• Value of the estate is more than £2.5million.
• Income tax and capital gains tax (CGT) liability for the administration period exceeds £10,000; or

• If the proceeds of assets sold in any tax year exceeds £500,000.

If the estate is required to register as a “complex estate,” the executors will be required to prepare and submit estate self-assessment tax returns for each tax year which the administration period spans.

If the estate is not required to register as a “complex estate,” any income and capital gains (not resulting in a total liability in excess of £10,000) realised in the administration period can be reported by an informal procedure – which entails a letter to HMRC detailing the taxable income and capital gains realised by the estate, together with calculations of the income tax and capital gains tax liabilities realised (and usually together with payment of the calculated liabilities).

It is not always possible to confirm how the estate tax matters will be dealt with until a detailed review of income and capital gains has been carried out. Our Tax Specialists can assist with this. 

In addition to the above reporting, capital gains arising on the disposal of UK residential property, resulting in a CGT liability, must be reported and CGT paid within 60 days of completion via a CGT on UK Property return. If a capital loss arises, there is no requirement to submit a CGT return and the loss can be offset against other capital gains realised by the estate. It is sometimes more tax efficient to appoint assets to beneficiaries prior to sale however this is a complex area and each situation is different. We recommend advice should be sought before any assets are disposed of.

Irrespective of whether the estate is complex or not, when distributions of assets are made from an estate to a beneficiary, if there has been taxable income accrued in the estate during the administration period (2 above), the distribution will be a deemed income distribution and will be taxable on the beneficiary.

The period following the end of the administration period

The income and capital gains realised need to be reported by the beneficiaries on their self-assessment tax returns (if relevant).

The income distribution comes with a tax credit for the basic-rate income tax paid by the estate. A form R185 ‘Statement of income from estate distribution’ needs to be completed by the executors/personal representatives or administrators to show the distribution of the estate income to the beneficiary and will be required when the income has been distributed.

This is then subject to income tax on the beneficiary in the tax year of the distribution to be included on their self-assessment tax return (or repayment claim if they are in a position to reclaim the tax credit for the tax paid by the estate).

If the beneficiary is a non-tax payer in the relevant tax year (as their taxable income falls within their income tax personal allowance for the year) they can reclaim the tax paid by the estate using a repayment claim.

If the beneficiary is a basic-rate income tax payer in the relevant tax year, no further tax will be payable, albeit the income may still need to be reported to HMRC.

If the beneficiary is a higher-rate or additional-rate income tax payer, the additional tax will be payable and the income will need to be reported to HMRC.

Trust Registration Service (TRS)

In most cases (depending on the terms of the will), when the estate administration period exceeds two years (starting with the date of death) the trust holding the estate assets will be required to register with HMRC under the Trust Registration Service (TRS).

This requirement is in relation to the express trust created by the will whereby the estate assets are held on trust by the trustees until distributed. There is a two-year exclusion for the registration under the TRS for trusts created by will, after which the trust will need to be registered with HMRC and then the TRS register closed, when the estate administration period will end.

Separately, will trust created by a will or the rules of intestacy will need to be registered under the TRS.

The TRS registration of a bare trust will typically be a non-taxable registration as the taxable income and any gains are taxable on the beneficiaries as if they owned them directly, and the details required will be the settlor, trustees (including lead trustee) and all beneficiaries who will receive benefit from the assets still held by the estate at the point of registration (usually just the residuary beneficiaries).

Other will trusts will likely be taxable registrations – with the possible exceptions for interest-in-possession (aka life interest) trusts where the income is paid directly (called “mandated”) to the life tenant beneficiary.

Our tax specialists can assist with the registration if required.

Automatic Exchange of Information (AEOI)

If the trust holds investments and the investments are discretionary managed by an investment professional, the trust will also likely need to register with HMRC under the Automatic Exchange of Information (AEOI) regulations. For trusts in existence before 31 December 2025, the registration deadline is 31 December 2025.

For new trusts, the deadline is 31 January following the calendar year in which the trust is in existence.

Our accountancy firm can assist with the registration if required.

VAT After Death

The VAT position of a deceased VAT registered individual can be complex, and we would strongly recommend specialist advice is sought.

Broadly, the executors/personal representatives or administrators must review the deceased’s VAT position and file any outstanding VAT returns and pay any outstanding VAT liabilities.

In some cases, the executors/personal representatives or administrators continue the VAT-able supply, even just to wind-down the business. Broadly, if the estate is finalised within a one year period, by custom, HMRC allow the executors/personal representatives or administrators to be substituted for the ceased for VAT purposed and continue to use the deceased’s VAT registration. After this year and the estate has not been finalised, the executors/personal representatives or administrators will likely need to VAT register in their own right.

If it is likely that the executors/personal representatives or administrators will not merely winddown the business (which they will need specific powers in the deceased’s will to do), HMRC will likely require the executors/personal representatives or administrators to register for VAT in their own capacity straight away. It should be possible in each of these 2 cases to transfer the deceased’s VAT number to the executors/personal representatives or administrators.

HMRC can raise VAT assessments for up to 4 years after the deceased’s death.

Get Professional Support

If you need help with estate administration, probate, or tax compliance, our team of chartered tax advisors and probate specialists can guide you through the process.

Contact us today to speak with an experienced tax advisor and ensure everything is handled correctly and efficiently.