Winding up the Estate
Reporting estate income
You may need to complete a tax return for the estate covering the period of administration. The executors or personal representatives are responsible for reporting the sale of assets and any income received during the administration period. The period starts on the day the deceased died and ends when all of the estate has been distributed. It will be necessary to complete a Trust and Estate Tax Return if:
- the income tax and capital gains tax for the administration period was more than £10,000
- more than £250,000 came from the sale of the estate’s assets by the executors in any tax year that ended before 6 April 2016
- in the current tax year more than £500,000 came from the sale of the estate’s assets by the executors
- the estate was worth more than £2.5 million at the date of death.
Some income such as bank or building society interest and dividends will have been taxed already and there will be no further tax to pay. However rents, interest on certain investments and income from overseas assets is likely to be received gross. It may also be necessary to include any capital gains arising from the sale of assets in the estate. One common question is what happens to Premium Bond prizes received after the death of the deceased – the answer is that they are included within Estate income along with other sources of income such as dividends and bank interest. See the proforma accounts in the Templates section
If you need to complete a Trust and Estate Tax Return, you can do it online, or fill in a paper form (SA900). If you are asked to complete a Trust and Estate Tax Return for the administration period, you must send it back on or before:
- 31 October following the tax year it relates to if you send it on paper
- 31 January following the tax year it relates to if you send it online
If you want to finalise the administration period earlier than this, ask HMRC to send you a paper tax return. You won’t be able to complete it online.
One final task that may need completing is the preparation and distribution of estate accounts. There is no automatic requirement for these to be prepared and no prescribed format. In most cases where the beneficiaries are limited in number and comprise only family members it will not be necessary. However, beneficiaries and creditors of the estate are entitled to request accounts. The accounts will normally comprise of:
- the assets of the estate and the proceeds from their sale
- the liabilities of the estate at date of death and their repayment
- liabilities arising from the death and paid out of the estate such as funeral expenses
- income received after death from the assets held at the date of death
- distributions made to beneficiaries in accordance with the terms of the will, or intestacy rules
Included within the Templates section is a proforma set of Estate Accounts which can be downloaded and used.