Income Tax reporting

Non-reporting estates

Some estates do not require any reporting to HMRC. Although very few meet this criterion it is useful to rule this out, to save unnecessary work during a difficult time.

If the estate has no chargeable income and no chargeable gains, then there is no need to notify HMRC, either via the Trust Registration Service and Self-Assessment or under the informal procedures (discussed further below). This is provided there is no need to make any claims to reliefs or elections.

Up to the 5 April 2024, if the only income received by an estate was interest from a bank account and this was less than £500, there was no need to report this to HMRC.

From the 6 April 2024, the same limits apply, but to any income source.

This applies to each tax year the estate was in administration, with no ability to roll forward any unused amounts.

Informal reporting for ‘simple’ estates

If all the following criteria are met, then the estate will be ‘simple’:

• The total Income Tax and Capital Gains Tax due by the estate over the whole period of administration is less than £10,000
• the estate had a gross value of less than £2.5m at the date of death
• proceeds received by the estate for the disposal of assets does not exceed more than £500,000 in a single tax year during the administration period.

If the estate is deemed to be ‘simple’, but there is a disposal of UK residential property this should still be reported to HMRC via the Capital Gains Tax on UK property Service. This is regardless of the level of sale proceeds or amount of Capital Gains Tax due.

How to report Informally

Simple estates can be reported by writing to HMRC at the end of the administration period. This is known as the ‘informal arrangement’ and should include:

• Your name, address and phone number
• the name, address, National Insurance Number, Unique Taxpayer Reference of the deceased
• the Income Tax and Capital Gains Tax already reported and paid during the period, such as the sale of UK residential property
• the Income Tax and Capital Gains Tax still due for the whole administration period.

Formal reporting for ‘complex’ estates

Formal reporting is required if the estate fails any of the three criteria to be a simple estate, for example:

• The tax liability for the whole of the administration period is more than £10,000
• the estate has a value at the date of death over £2.5m
• the proceeds received by the estate for the disposal of assets exceeds £500,000.

The personal representative will need to set up an online government gateway account for the Estate and register for Self-Assessment with HMRC by 5 October after the tax year a return is required.

HMRC will issue the Estate with a Unique Taxpayer Reference (UTR) and request a Self Assessment Tax return for that year. This must be submitted to HMRC by 31 October if submitting by paper, or 31 January if submitting online. Any tax due will also need to be paid by 31 January.

At Crowe, we understand that dealing with the complexities of estate administration during the loss of a loved one can be overwhelming. Our team is here to provide compassionate and professional assistance with the reporting of complex estates to HMRC for Income Tax purposes.

If you have any questions or need support, please do not hesitate to get in touch with us. We are committed to helping you navigate this challenging time with care and expertise.