TSEM7410 - Deceased persons: administration period: conditions for informal payment procedures

The reporting requirements for income or capital gains during the administration period of a deceased estate, depend on the type and level of the income or gains.

No income and no chargeable gains

If an estate has no chargeable income and no chargeable gains during the administration period, then there is no requirement to notify HMRC, either formally via the Trust Registration Service and Self-Assessment, or under informal payment procedures as long as there are no claims to reliefs or elections.

Tax years 2024-2025 onwards

For tax years 2024-2025 onwards, there is no need for personal representatives to report the estate’s income to HMRC where it is less than £500 for the year.

The £500 tax-free amount applies:

  • for each tax year of the administration period from 2024-25, but you cannot carry over unused amounts from one year to the next
  • to all types of income, except ISAs, which continue to be exempt from Income Tax or Capital Gains until the estate is closed or up to 3 years after the person’s death.

If the estate has income over £500, there is no £500 deduction, and the personal representative should report all the income.

Tax years up to 2023-24

For tax years up to 2023-2024, if the only income the estate received during the administration period was from bank account interest and the total amount received over that period was less than £500, then personal representatives do not need to report the estate to HMRC.

If during the administration period the estate has any other income or the total amount of bank account interest exceeded £500, then tax is due on all the income received; the £500 tax free amount for bank account interest should not be deducted from the income.

Reporting using informal payment procedures

Personal representatives report tax owed in the administration period by writing to HMRC (known as ‘informal arrangements’) if all the following apply:

  • the estate was valued at less than £2.5 million when the person died and
  • the total Income Tax and Capital Gains Tax due is less than £10,000 and
  • the proceeds of assets, whether those assets are chargeable or not, they sold in any one tax year are less than £500,000.

Informal arrangements may not be accepted where any part of the payment due relates to:

  •  tax on payments within ITA/S946 or
  •  a recovery of tax overpaid under Section 30 TMA 1970, or
  •  the recovery of excessive tax credits under Section 252 ICTA 1988.

See TSEM7413 for reporting under informal payment procedures and TSEM7376 for complex estates.