TSEM7608 - Deceased persons: absolute interests in residue - liability during the administration period

From 6 April 2024, as personal representatives are not required to report to HMRC or pay tax on estate income of less than £500 per annum, beneficiaries will not be provided with a form R185 (Estate Income) or be required to report or pay tax on amounts within this sum. ITTOIA/S680B. 

A beneficiary is treated as having received income from an estate only if a payment is made to the beneficiary in the year of assessment concerned. If no payment is made to a beneficiary in the year of assessment, the residuary income is carried forward to the next year.

A beneficiary who receives a payment from the estate is treated as having received as income for that year the lesser of

  • the amount actually paid to the beneficiary from the estate in that year, or
  • the amount of available income from the date of death until the end of the tax year in which the payment is made, less any amounts which have already been treated as the beneficiary’s income for earlier years.

The payment is treated as having been made from the following sources in this order

  • first out of income which has borne basic rate tax
  • then out of income which has borne savings rate tax (for years where this rate applies)
  • finally out of income which has borne dividend rate tax.

Any residuary income that is not treated as the beneficiary's income is carried forward to the next year.

The beneficiary is treated as having received, in the year of assessment in which the administration was completed, the balance of their share of residuary income. This is their total share of residuary income from the commencement to the completion of the administration that has not been treated as the income of earlier years.

Confirming the amount of income

The personal representatives may supply the beneficiary with a form R185 (Estate Income). This is a statement showing the amounts treated as income and the amounts of tax (and rates) deemed to have been paid on that income.

Where the statement on form R185 (Estate Income) shows income bearing non-payable or non-repayable tax, this amount is not available for repayment but a credit is given against higher rate tax liability.