A death splits one taxpayer into two. Everything the person earned up to the day they died belongs to their own final tax position — which their personal representatives settle with a final return, or informally with HMRC. Everything the estate earns in the administration period — from the day after the death until the residue is ascertained and the estate can be wound up — belongs to a different taxpayer entirely: the estate, taxed at its own rates, with none of the allowances a living person gets.
The practical trap is timing, not category. Interest is now paid without tax deducted — banks and building societies stopped withholding it in 2016 — so where an estate has interest, the tax is owed, not already paid. Nothing arrives to warn you. The certificate turns up months later, addressed to a person who has died.
Valoren covers England & Wales. Income tax on estate income is a UK-wide matter, but the surrounding probate process differs in Scotland (confirmation) and Northern Ireland.
An estate is taxed at flat rates with no allowances whatsoever. No personal allowance, no personal savings allowance, no dividend allowance. The first pound of taxable estate income is taxed at the same rate as the last.
A basic-rate taxpayer can receive £1,000 of interest tax-free under the personal savings allowance. An estate receiving the same interest has no equivalent — beyond the £500 de minimis, every pound is taxable.
Selling estate assets is a different tax. Personal representatives pay 24% on gains, and get the annual exempt amount of £3,000 — but only for the tax year in which the death occurred and the two tax years after it. From the fourth year of an administration there is no exemption at all, which is one of the quiet costs of a slow estate. A residential property sale carries its own 60-day reporting and payment deadline, separate from everything on this page.
Capital gains on estate disposals→Since 6 April 2024 an estate pays no income tax, and reports nothing to HMRC, where its income from all sources is £500 or less in a tax year. This is the single most useful fact on this page: it takes most ordinary estates out of the system entirely.
It is a cliff edge, not an allowance. Income of £500 exactly: nothing to report. Income of £501: the whole £501 is taxable, not the £1 above the line.
It applies per tax year, and does not roll over. An estate open for three tax years gets £500 in each. An unused amount in year one does not add to year two.
It covers every type of income — interest, rent, dividends, business profits — after taking out ISA income, which is exempt separately.
It flows through to the beneficiaries. Where an estate's income falls within the £500, personal representatives issue no R185, and beneficiaries have nothing to report or pay on that money.
An ISA does not die with its owner. It becomes a continuing account of a deceased investor, and the interest, dividends and gains inside it stay tax-free until the earliest of: the administration being completed, the third anniversary of the death, or the account being closed. Past that point the wrapper falls away and the income becomes ordinary taxable estate income. An estate that drifts past three years can acquire a tax bill it never had.
For income received up to 5 April 2024 a different, narrower rule applies. No report was needed only where the estate's only income was bank or building society interest and the tax due on it was £100 or less. If your administration straddles that date, each tax year is tested on the rule that applied to it.
If the estate has income above £500, or chargeable gains, there is tax to report — and two ways to do it. Simple estates write HMRC a letter. Complex estates register and file a formal return. Three thresholds decide which, and an estate must satisfy all three to use the letter.
Fail any one of them and the estate is complex: it must be registered with HMRC and returns filed. Note the third test looks at sale proceeds, not gains — selling the family home for £520,000 at no gain at all still pushes an estate into the formal route.
Write to HMRC once, at the end of the administration period. The letter must contain:
HMRC Bereavement Services, HM Revenue and Customs, BX9 2BS, United Kingdom. HMRC calculates the liability and writes back. There is no form and no online service for this route.
Register the estate through HMRC's online Register an estate service to get the estate its own Unique Taxpayer Reference, which arrives within about 15 working days. Then file an SA900 Trust and Estate Tax Return for each tax year of the administration with income or gains to report.
The deadlines are the Self Assessment deadlines, and they are hard.
Miss the filing date and the penalty is £100 immediately — even where no tax is owed. After three months it becomes £10 a day up to £900; at six months and again at twelve, a further 5% of the tax due or £300, whichever is greater. Late payment adds 5% of the unpaid tax at 30 days, six months and twelve months, plus interest running at 7.75%. These are charged to the estate, and a personal representative who does not pay them from the estate can be left carrying them personally.
R185 (Estate Income) is the statement a personal representative gives each beneficiary showing the estate income paid to them and the tax the estate has already borne on it. It is not sent to HMRC. It goes from you to the beneficiary, who uses it on their own tax return — or to claim money back.
Estate income reaches a beneficiary net — the estate has already paid tax on it. The beneficiary is then taxed on the grossed-up figure (the payment plus the tax the estate bore) and given a credit for that tax. In practice:
Issue one R185 per beneficiary, per tax year in which income is paid out to them.
HMRC publishes a fresh version each year; the current one is the 04/26 edition for 2026 to 2027. Use the edition matching the tax year the income belongs to.
Beneficiaries frequently need the R185 years later, when their own return is queried. Give them a copy and keep one with the estate papers.
Estate income tax is not one event. It is a small obligation that repeats every 5 April the estate stays open, and a closing one when it ends. The executors who get caught are the ones who treated it as a task for the end.
Most estates finish inside the executor's year — see how long probate takes for the fuller timeline.
Interest certificates
Split at the date of death — before and after.
Letting-agent statements
And property expense records.
Dividend vouchers
And any nominee statements.
Every payment to a beneficiary
With its date — this is what the R185 is built from.
None of this is difficult. It is invisible until it is late — which is why the tax calendar belongs in the estate file from the first week, not in the executor's memory.
Estate income tax is one of dozens of obligations an executor picks up in the first months. Alongside the grant application, the asset schedule, the creditor notices and the distribution, Executor's First Hour gives the person acting a prepared, personalised starting file for £179, so the first week is spent acting rather than searching.
Valoren is not a law firm and does not provide legal or tax advice. This page explains the process and the published figures; it is not advice on your estate. Figures checked against gov.uk and HMRC guidance on 04 08 2026.
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