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HMRC internal manual

Trusts, Settlements and Estates Manual

Deceased persons: interests in residue: practical and computational aspects - residuary income

The guidance about absolute interests in residue at TSEM7602-TSEM7608 uses the term residuary income. This is a measure of the deemed income of the beneficiary. In practice you will rarely need to compute it but you may need to know how this is done.

Residuary income should be computed by first calculating the net statutory income of the estate. Deduct charges and allowable interest.

Then make the following further deductions

  • the amount of any income falling to be paid to persons entitled to specific legacies
  • personal representatives’ expenses properly chargeable to income
  • interest which does not fall into a qualifying purpose, including interest on unpaid legacies and in Scotland interest on prior and legal rights.

Do not make any deduction for

  • interest on overdue tax (ITTOIA/S869)
  • interest on unpaid inheritance tax (Section 233(3) IHTA 1984)
  • expenses of managing real property where these have been deducted in arriving at the amount assessable as property income. This is because the same expenses cannot be allowed twice.