First published 1 July 2024. Latest update: 22 July 2024.

Updates made for:

• Updates to 1.2 Amending the Tell Us Once Notification and 3.1 Agent Authority to explain the interaction between use of the P1000 and amendments to the Tell Us Once service for when the wrong person is recorded as the personal representative on HMRC's systems. 

Introduction 

Helping a client through the administration of the estate of a loved one can be challenging work requiring both tact and understanding. It can also be rewarding when it is possible to lift some of the administrative burden from a grieving family.

In recent years, the ATT has been part of a working group with HMRC looking at how aspects of the process of estate administration could be improved for taxpayers and agents. During this time, the group has made a number of improvements to guidance on GOV.UK and in HMRC manuals, as well as looking at the wording of letters HMRC sends to personal representatives.

Based on some of the discussions in this group, this guide looks at the income tax aspects of dealing with a UK-resident estate from the agent’s perspective which we hope might be useful to members. Non-UK resident estates are outside the scope of this note.

While we have endeavoured to ensure this note is as accurate as possible, it is intended for general guidance only and no responsibility can be accepted by the Association of Taxation Technicians for loss occasioned to you or any other person acting or refraining from action as a result of any material in this document. If you have any comments or corrections, please send them to [email protected].

Topics covered in this article:

1. How does HMRC find out about a death?
    1.1 Tell Us Once Service
    1.2 Amending the Tell Us Once notification 
2. Income tax position – background
3. Income tax position  - Affairs to the date of death 
     3.1 Agent Authority
     3.2 Deceased in self-assessment
        3.2.1 Returns to date of death filed by the personal representatives
        3.2.2 Returns to date of death filed by an agent
     3.3 Deceased not in self-assessment
4. Period of administration
     4.1 When is an estate simple or complex?
     4.2 New de minimis rules for income tax
     4.3 Registering a complex estate
     4.4 Informal arrangements
     4.5 CGT on UK Property
5. Other relevant issues
     5.1 Contacting HMRC
     5.2 Delays processing informal estate returns
     5.3 Repayments and avoiding repayment delays
     5.4 Feedback requests
6. Further sources of guidance

1. How does HMRC find out about a death?

1.1 Tell Us Once Service 

HMRC typically find out about the death of a taxpayer via the family or a personal representative (PR) through the Tell us Once service. This service is accessed online or by phone and is available to residents of England, Scotland or Wales. The registrar will explain the service and provide a unique reference number for the person registering the death to use. This reference number is called the Service Reference Number (SRN) and is valid for 28 days. At the end of the process, they will be provided with a second reference number - the NTU number. It is helpful to retain this in case there is a need to amend the Tell Us Once notification. 

When there is an inquest, it will be necessary not only to get the reference number from the registrar, but also the interim death certificate from the coroner holding the inquest.

For those in Northern Ireland, resident abroad, or who don’t wish to use Tell us Once, it is possible to ring HMRC's bereavement line to advise them of a death directly.

From HMRC’s perspective, it doesn’t make a difference which route is used, but using the Tell Us Once service (where available) has the advantage of informing more Government departments, for example:

• the DVLA to cancel driving licences;
• the Passport Office to cancel a passport; and
• the DWP to stop benefits including State pension payments.

However, if the deceased still had an outstanding loan with the Student Loans Company (SLC), then the Tell Us Once service doesn’t currently inform them and a separate call to the SLC will be needed.

HMRC may not always get all the information needed from the Tell Us Once service, for example if the personal representatives are not yet known. The person who registers the death and uses the Tell Us Once service may not be a personal representative, or know all the necessary details. Where this is the case, HMRC will write out to the last known address of the deceased for more details.

It’s really important that the correct information about the deceased is provided during the Tell Us Once stage. In a recent case shared with us by a member, a relative mixed up one letter in their deceased relative’s NI number, resulting in them receiving a letter about a different person entirely. This was not only distressing for them, but could also have had serious consequences for the third party.

It is not possible to inform HMRC of a death by recording the date of death in the white space of the next tax return.

1.1 Amending the Tell Us Once Notification 

Earlier this year we received a number of reports that the person who reported the death via the Tell Us Once service was being recorded on HMRC’s systems as the personal representative. Of course, this may not be the case – and at that stage of the process, the personal representatives may not be known as the will has not been read. This can cause issues later on for the actual personal representatives, with members reporting to us examples of HMRC insisting that refunds should be going to the person who completed the Tell Us Once service rather than the actual personal representatives. 

We  raised these concerns with HMRC to see if we could establish where the issue/confusion was arising during the process. They confirmed that the default position is that whoever completes the Tell Us Once process will be recorded as the personal representative. If this is not the case, then there are two options: 

•  An amendment can be made to the original Tell Us Once Notification. The individual making the amendment will need the NTU reference number issued on completion of the first Tell Us Once process to make the amendment. The amended details will then be sent to all relevant departments, not just HMRC.
• A P1000 form is completed with details of the Personal Representatives. HMRC have confirmed that they would update their records based on the information here, and there would be no need to also amend the Tell Us Once notification. 

From the perspective of HMRC, the P1000 route is advised and it is not necessary to do both steps above. 

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2. Income tax position – background

When it comes to considering the income tax position of a deceased taxpayer, there are two distinct elements to be completed.

• The first element is the finalisation of the tax affairs of the deceased up to the date of death.
• The second element is the tax due on any income or gains received by the estate during the period of administration

Once HMRC are aware of a death, they set various flags on their systems to stop the issue of penalties and determine what, if any, returns are needed.

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3. Income tax position - Affairs to the date of death

3.1 Agent authority

Where the deceased had an authorised agent, that authority is automatically cancelled on death, resulting in the loss of online access to the deceased’s affairs. In addition to completing AML checks on the personal representatives, the agent will need a new authority to act for the estate, signed by a personal representative.

In practice, most agents use the 64-8 as a familiar and readily available form. While the 64-8 is still effective to help the agent regain authority, HMRC would prefer agents to use a P1000 form. This provides more information, such as details of the personal representatives, which they may not necessarily have received. It can also be used to correct the position where the wrong person has been recorded as the Personal Representative as part of the 'Tell Us Once' process noted above. This can affect HMRC's ability to make any subsequent refunds - see ‘repayments’ under ‘other matters’ below.

A P1000 is automatically issued after death to the address of the deceased, or to a personal representative if HMRC are aware of them.  However, since 12 July 2024, the P1000 form has also been made available to download on GOV.UK. An agent authorised under a P1000 should be able to speak to HMRC about affairs up to the date of death and the period of administration. 

As this is a new process we would be grateful for feedback from members on their experiences of using a P1000. 

Note: It is not possible for both a tax agent and a solicitor to have authority to speak to HMRC about the estate/individual’s tax affairs. Only one can be authorised at any given time. 

3.2 Deceased in self-assessment

Where there are outstanding returns to be completed, returns for tax years prior to the tax year in which the deceased died can be filed online as normal.

The return for the tax year in which death occurred will generally need to be submitted on paper. Agents can file online for the year of death, but HMRC prefer that agents wait until after the end of the tax year to do so.

3.2.1 Returns to date of death filed by the personal representatives

As set out in Agent Update 103, personal representatives filing returns for the tax year in which the death occurred should file the return on paper.

This does mean personal representatives have a shorter deadline to file, as the usual deadline for paper returns is 31 October following the end of the tax year, rather than 31 January for online filing. However, for returns issued after the end of July, the notice to file letter sent to the personal representatives may have a later deadline as personal representatives are usually given three months and seven days from the date of notification to file.

Paper returns can be requested from HMRC by calling the bereavement line. Supplementary pages to the SA100 can be downloaded from GOV.UK. A reference copy of the 2023/24 tax return can be found on GOV.UK.

If the return for the year of death is not yet available (for example, the final return for a death in September 2024 will be the 2024/25 return which will not be available on GOV.UK until April 2025 at the earliest), HMRC have confirmed that it is acceptable to manually change the tax year at the top of a paper SA100 dated for a previous tax year to show the later tax year. Agents are advised to obscure the unwanted year with black ink and write clearly the appropriate tax year so it is clear to HMRC which year the return relates to.

If the personal representatives are not able to send the return in by the deadline on the notification letter, they can contact the bereavement helpline who may agree a reasonable later filing date for the appropriate year, which will prevent a penalty notice being issued. Any penalties which are raised are appealable.

3.2.2 Returns to date of death filed by an agent

Agents can file returns for tax year in which the death occurred online, but HMRC prefer these to be filed after the end of the tax year. Otherwise, even if software permits a submission, the return will fall out of the usual automated processes, which can slow processing down.

For a death occurring in, say, February, waiting until 6 April to file may not be an issue, but agents are unlikely to want to wait until the following year if the death occurs in May or June. In these instances, HMRC recommend filing a return on paper rather than online.

3.3 Deceased not in self-assessment

If the deceased was not in self-assessment, then in many cases HMRC will already have the necessary information to resolve the tax position. The personal representatives will receive a P1001 letter to tell them what, if anything, they need to do.

Pay and pensions

Typically, HMRC receive the final pay and tax details from employers/pension providers within 35 days of them receiving notice of the death. The key thing for personal representatives to do is to ensure employers and/or pension providers are aware of the death.

Bank interest

Any figure that HMRC have for bank interest is likely to be an estimated figure. This will be corrected later after end of the tax year – once the information has been received from the bank and building societies.

This correction can take some time, especially if the deceased died early in the tax year, as HMRC will not get bank interest directly until 30 June following the end of the tax year. It then takes some months to match the information received to taxpayers and issue corrective assessments. If the personal representatives have the necessary details, and especially if tax is likely to be due, it is helpful if personal representatives can supply this to HMRC sooner by letter or phone to the bereavement line.

Given the higher interest rates over recent years, it is much more likely that there may be tax on interest payable.

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4. Period of administration

Strictly speaking, the period of administration runs from the date of death to the date that the residue of the estate is finalised. This is not always easy to establish, and in practice, the period of administration is often taken as running to the point around or just after final distributions are made, when no more interest or other income is expected to be received.

The mechanism for paying tax on any income and gains during the period depends on whether or not the estate is considered complex.

• The tax for a non-complex estate can be dealt with by letter for the whole administration period using what are called ‘informal arrangements’
• If the estate is complex, then it will need to register with HMRC, obtain a Unique Taxpayer Reference number and complete tax returns for each tax year that the administration is ongoing.

According to Agent Update 114, when an estate becomes complex part way through the period of administration, self-assessment returns only need to be sent for the tax year in which the estate become complex, and future years as appropriate.

If the personal representatives opt to send in self-assessment returns for the years before the estate became complex, a covering letter will be needed to explain that the estate was not complex during that year to avoid the issue of late filing penalties.

4.1 When is an estate simple or complex?

A simple estate must meet all three of the following criteria:

• The estate has a gross value on the Grant of Probate or Confirmation of less than £2.5m
• The total income tax and CGT due for the administration period is less than £10,000
• The sales of all assets (whether chargeable or not) is less than £500,000

If the estate does not meet all of the above, then it will be considered complex.

4.2 New de minimis rules for income tax

Having considered whether the estate is simple or complex, it’s also necessary to consider new rules for low income estates to see if the estate has income tax to pay.

From 6 April 2024, where the estate income is less than a ‘de minimis’ amount in the tax year, then the estate is deemed to have nil income and therefore no income tax to pay.

For 2024/25 onwards, the de minimis amount has been set at £500. This covers any income and is thus broader than previous concessions which only applied to bank interest.

If the estate income exceeds £500, then all the estate income for that year needs to be taxed. It is very much a ‘cliff edge’ or ‘all or nothing’ test.

As an additional benefit, when income from the estate is distributed, any income within the de minimis will not be subject to tax in the hands of the beneficiaries. Aggregate ‘de minimis estate income’ does not need to be included on the R185, and the beneficiary does not need to include it on their self-assessment return.

There is no similar de minimis for Capital Gains Tax (CGT) but the annual exempt amount (AEA) is available to the personal representatives for the tax year in which the death occurred and the following two tax years. The AEA is £3,000 for 2024/25.

4.3 Registering a complex estate

Complex estates are registered with HMRC via the Trust Registration Service (TRS). Once registered, the estate will be issued with a UTR and can start filing returns as required.

As this is an administrative requirement for estates, the normal rules that apply to trusts using the TRS do not apply. Accordingly, personal representatives are not legally required to keep their registration up to date, or to close down their record when the estate has been administered. However, HMRC would appreciate it if personal representatives could keep the record up to date if there are any changes and if the register could be updated to report the cessation of the administration. The first is in the interests of the personal representatives to avoid post being misdirected and the second is more of a housekeeping at the end of the administration.

Guidance on this aspect of the TRS can be found in the TRS manual at TRSM27010.

As the estate will be issued with a new UTR, HMRC’s guidance confirms that a 64-8 for that record will be required at that point, although we understand from HMRC that where the agent and personal representative details are held on the record and they haven’t been told otherwise they would usually accept that authority granted via a P1000 should apply equally to the formal administration period.

4.3.1 Interaction with the new demimis rules.

Once a notice to file has been issued, the personal representatives are obliged to send a return to HMRC. We asked HMRC what will happen if an estate comes in and out of the de mimimis rules over various tax years. HMRC has said that the new 2024-25 returns which will be published next year will make provision for the new rules, but if personal representatives wish, they can call the deceased estates helpline on 0300 123 1071 and ask for the notice to be withdrawn if there is no taxable income or gains for the tax year in question.

If a personal representative asks for a return to be withdrawn one year, it will still be issued the next year (if the estate has not been closed) in case the estate goes back over the threshold.

4.4 Informal arrangements

Where the estate has exceeded the de minimis thresholds but is considered simple, it can apply what are called the ‘informal arrangements’.

In this approach, rather than having to register the estate and submit annual tax returns throughout the period of administration, the personal representatives can deal with the income and gains via letter. Details of this approach are covered in guidance on GOV.UK under ‘reporting on simple estates’.

Previously, many agents included a cheque for the tax due when sending the letter. HMRC now prefer the calculation and a request for a payment reference to be sent first, with the payment to follow once that reference has been issued. Otherwise there is no liability to which they can match the payment and this can slow the process down.

Please note that if the estate has disposed of a residential property, the informal procedures do not replace the need to complete a ’60-day return’ if it is due – see 4.5 below.

4.5 CGT on UK Property

This guide has focused on income tax aspects, but of course Capital Gains Tax (CGT) may apply if the personal representatives sell assets during the period of administration for more than the probate value.

As noted above, the annual exempt amount (AEA) is available to the personal representatives for the tax year in which the death occurred and the following two tax years. The AEA is £3,000 for 2024/25. Personal representatives will pay CGT at 24% on disposals of residential property and 20% on all other gains (apart from gains on carried interest which are taxed at 28%).

If the estate sells UK residential property and there is tax to pay, then the usual 60-day reporting rules that apply to UK-resident individuals will also apply to the estate. (Non-resident estates, which for CGT purposes means the deceased was non-resident when they died, may have to report other property disposals under the 60-day reporting requirements but this is outside the scope of this note.)

HMRC have some guidance on how to manage the CGT reporting online for an estate, otherwise there is an interactive form available which can be printed and posted. The ATT’s ‘CGT on UK Property Reporting Service - a user's guide’ has a short section on reporting for estates.

If the estate also needs to report via the ‘informal arrangements’ noted in 4.4, details of the 60-day report should be included in the covering letter, including any submission/payment references and a note of the CGT which has been paid so HMRC can match the letter to the earlier report.

In some circumstances, the 60-day report alone may be sufficient, if CGT on the property disposal is the only tax payable on the estate.

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5. Other relevant issues

5.1 Contacting HMRC

Agents or taxpayers looking to speak to HMRC about the income tax affairs for a deceased individual or estate should call 0300 200 3300 and say ‘bereavement’. The automated voice recognition software should then direct the call to the bereavement team. This team is more likely to be able to assist than staff on the Agent Dedicated Line.

Agents looking to follow up on post relating to bereavement issues should allow eight weeks for the initial processing before chasing. It is helpful if agents can avoid chasing until that time has elapsed as chasing can slow down processing further. Again, agents should call the bereavement helpline rather than the main dedicated agent helpline.

5.2 Delays processing informal estate returns

We have received feedback from a number of members that informal estates are taking longer than normal to process. We raised this with HMRC who advised that they have a recovery plan in place to deal with these postal arrears.

Formal estates are not currently subject to delay and the processing times are running at around three weeks.

5.3 Repayments and avoiding repayment delays

In Agent Update 114, HMRC recommend that agent should ensure that HMRC have all the relevant details about the personal representatives of the estate before submitting a self-assessment return which will result in a repayment.

Repayments can fall out of the automated processes if HMRC don’t have an authority for the agent on file or details of the personal representatives. In these situations, the repayment will have to be worked manually, which means it will take longer.

5.4 Feedback requests

Feedback from members regarding issues concerning deceased estates is always welcome. Please contact [email protected].

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6. Further sources of guidance and useful links 

• Dealing with the estate of someone who’s died – a step by step guide on GOV.UK about the probate process.
• Returns for deceased persons and estates in the administration period -  Agent Update 114 from November 2023
• Returns for the tax year in which someone died and earlier - Agent Update 103 from December 2022
• HMRC internal guidance on detailed with deceased estates  - SAM90010
• HMRC internal guidance on conditions for informal payment procedures – TREM7410 – more detailed than GOV.UK guidance. 
• P1000 form to tell HMRC about who is dealing with the estate 

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