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HMRC internal manual

Trusts, Settlements and Estates Manual

Deceased persons: what personal representatives do

Personal representatives have to identify the deceased’s assets and if necessary realise them (turn them into cash). They must settle the deceased’s debts including any tax liability. They must pay any inheritance tax that is due. They have also to pay out any legacies.

Then they pay out the residue (what is left after settling debts and legacies) to the beneficiaries in accordance with the terms of the will or the rules of intestacy. Sometimes this may involve setting up a trust.

While taking these actions they will probably receive income from investments or other property left by the deceased. They may also receive income from bank/building society accounts that they open to hold the funds realised.

The income they receive is that of the personal representatives as it is paid or credited. They are liable to income tax at the basic rate, savings rate (for years where this rate applies) or the rate applicable to UK dividends, depending on the year and the source of the income. But they are not liable to either the starting or higher rates of tax, because these rates apply only to individuals.

They may also be liable to capital gains tax if they dispose of assets during the period of administration (CG30200 onwards). Where there is liability to either income tax or capital gains tax, we need to deal with this liability either through the informal payment procedures set out at TSEM7410 or via the Self Assessment regime. HMRC Administration of Estates Cardiff will be responsible for the Self Assessment cases subject to the exceptions at TSEM7204.