Dealing with income and capital gains tax during the period of administration.
Here are some terms you should be aware of.
Firstly check whether formal Self-Assessment Returns are required
If not, all you need to do is submit a summary detailing the estate’s income and capital gains during the period of administration. Where Self-Assessment Returns are required request an estate Unique Tax Reference (UTR) from the Revenue by ringing 0300 123 1072.
Tax on the estate
The estate will be taxed at rates depending on the type of income. No personal, savings or dividend allowance are available.
- non-savings and savings income -20%
- dividend income – 7.5%.
For the disposal of the estate assets the amount chargeable to capital gains tax (CGT) will be the difference between the proceeds and the probate value. An annual exemption is due for the year of death and the following 2 years along with a deduction for the cost of obtaining probate. The CGT rate on estates are:
- residential property – 28%
- Other assets – 20%
Where a beneficiary lived in an estate property the Principle Private Residence relief may be due. Consider appointing asset to the beneficiaries prior to disposal to take advantage of the beneficiaries potentially lower rates (10% and 18%). Capital losses are set off against capital gains in the same year and any excess are carried forward. Consider appointing loss producing assets prior to disposals to beneficiary where the beneficiary can make better use of the loss. Where assets have decreased in value check whether a reduction in IHT can be claimed.
Tax on the beneficiary
The PR will supply beneficiary with details of the income to be reported on their Self-Assessment tax Returns on forms R185.
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Published 13 September 2017.
Updated 16 May 2018.