Coping with the loss of a loved one is always challenging. Amidst the whirlwind of emotions, managing financial matters is very daunting especially when dealing with estate administration and the payment of various taxes. If you are called upon to be an executor, there are a number of tax implications that you need to be aware of.

Before you start it’s useful to understand how the value of the deceased’s assets and liabilities are calculated.  Basically, this involves identifying the value of property, all savings, investments, mortgages, loans and other debts (including Income Tax owing/repayable) on the date of death – plus the value of some gifts made in the last seven years – to find out if any Inheritance Tax (IHT) is payable.  

However, no IHT will be payable if:

  • the deceased left their entire estate to a surviving spouse/civil partner
  • the net value of the estate is below £325,000 and not left to a spouse/civil partner
  • the net value of the estate is below £500,000 and includes an interest in a home which is left as part of the entire estate to children/grandchildren

If any IHT is due, it is payable within six months of the date of death.  The executor must contact the bank/building society where the deceased held deposits to arrange payment to HMRC.  Alternatively, the IHT can be paid in instalments.

The IHT needs to be paid before probate can be applied for, the executor won’t be able to distribute an estate to the beneficiaries until probate has been granted.

Income Tax and Capital Gains Tax (CGT) will be payable if the deceased left assets which continue to generate income of more than £500 annually post death. This can happen if there is a property which is let and/or assets are sold whilst the estate is being administered.  

  • If a residential property is sold for more than its value on death, a CGT Property Return will need filing within 60 days of the sale completing.
  • If assets are sold for less than their value on death, some IHT paid might be refundable.
  • If the estate does not qualify as a ‘simple’ estate it will need to be registered on HMRCs Trust Registration Service, annual Self-Assessment tax returns will need to be filed and Income Tax due, paid.  

More information on how to deal with the estate of someone who has died can be found on the government website here.

Navigating Taxes after someone has died is challenging and stressful – especially when you are coping with your own emotions.  Our empathetic and supportive team at CKLG can support you through every step –including liaising with your choice of solicitor to obtain probate and, once obtained, the distribution of estate assets to the beneficiaries (as tax effectively as possible).

Call CKLG on 01223 810100 for friendly help and support.