Tax & HMRC


Tax & HMRC

Tax & HMRC – Solicitors in Gosforth Serving Newcastle upon Tyne, the North East and Nationally

Dispute Resolution Solicitors in Gosforth Serving Newcastle upon Tyne

An estate administration should only be considered concluded once it has been established that there are no outstanding tax issues.

The sort of tax issues that might arise during an estate administration are INHERITENCE TAX , INCOME TAX & CAPITAL GAINS TAX

We are Specialist Private Client Solicitors. Our Rebecca Griffiths is a member of the Society of Estate Practitioners, a worldwide professional association for those advising families across generations.

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We are based in Gosforth with parking facilities and we strongly recommend that you contact us as soon as you start to consider the gift so that we can help guide you further.  We can save you a lot of money and stress.

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INHERITANCE TAX

Each estate has a Nil Rate Band (NRB), which is the amount that can be left to non-exempt beneficiaries before inheritance tax is payable.

Since the 2017/18 tax year, individuals may have an additional Residence Nil Rate Band (RNRB) although this only applies in certain circumstances.

It is possible for the proportion of any unused parts of both the NRB and RNRB to be transferred between spouses and civil partners on the second death.

If the Executor / Administrator assesses that there is an inheritance tax liability they must settle it from the estate funds that are available.

Usually any inheritance tax must be paid before the Grant of Representation can be issued.

There are forms available which makes it possible for the release of funds from bank accounts held in the deceased’s name and, if there is property, it may be possible for this liability to be paid in instalments.

For examples of how inheritance tax can apply – see our IHT example scenarios.

INCOME TAX

Each tax year there is a standard personal allowance available to each individual, which is the amount of income that can be received before income tax is payable.

Since the 2016/17 tax year, basic rate taxpayers have an additional tax-free Personal Savings allowance, in relation to the interest earned on their savings and other investments (interest from ISAs or NS&I Savings Certificates are income tax exempt).

If the Executor / Administrator assesses that the deceased had an income tax liability they must use the estate funds that are available to pay it.

Given that the full annual allowance is available, irrespective of when in the tax year the death occurs, it might actually be that too much income tax was paid by the deceased and so a refund is due to the estate.

The Executor / Administrator must also ensure that any income generated during the course of the estate administration is appropriately taxed, if applicable.

There is no personal allowance available but only the basic rates of tax will apply.

Furthermore, ISA income now continues to be paid tax free.

CAPITAL GAINS TAX

Each tax year there is personal allowance available to each individual, which is the amount of gain that can be achieved on the disposal of assets before capital gains tax is payable.

If the Executor / Administrator assesses that the deceased had a capital gains tax liability they must use the estate funds that are available to pay it.

The full annual allowance is available irrespective of when in the tax year the death occurs.

The Executor / Administrator must also ensure that any gains generated during the course of the estate administration are appropriately taxed, if applicable.

A full annual allowance is available to the Executor / Administrator for:

the period from the date of death to the following 5 April (no matter how short this may be)

2 tax years following the year of death

Where gains arise in a later year, no annual allowance is available

The value to be used as the acquisition cost of the asset in any capital gains tax calculation – whether by the Executor / Administrator or a beneficiary if they receive the asset itself – is its value as at the date of death.

 

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