Income Tax During Estate Administration UK: Executor’s Guide

Most executors know they need to deal with inheritance tax and probate — but income tax is often overlooked until it becomes urgent. As executor you are personally responsible for three distinct income tax tasks: filing the deceased’s final tax return, accounting for income that arises during the administration period, and issuing the correct certificates to beneficiaries. Getting any one of these wrong can expose you to personal liability.

The Three Income Tax Tasks Executors Face

Estate administration involves three separate income tax obligations, each with its own HMRC rules and deadlines:

1. The deceased’s final income tax return — covering the period from 6 April of the last tax year to the date of death. Any outstanding tax must be paid from the estate.
2. Reporting income arising during the administration period — from the date of death until distribution, the estate is a separate income tax entity and any income (interest, dividends, rent) must be accounted for to HMRC.
3. Issuing R185 certificates to beneficiaries — whenever estate income is paid out as part of a beneficiary’s entitlement, the executor must provide an R185 showing the gross income and tax deducted so the beneficiary can account to HMRC correctly.

These obligations can overlap in time and it is common for executors to discover outstanding liabilities months into the administration. Starting with a clear HMRC notification at the outset saves significant problems later.

The Deceased’s Final Income Tax Return

The first step is to notify HMRC of the death. Call the HMRC Bereavement Service on 0300 200 3300 — this single call can notify multiple government departments at once. HMRC will then advise whether a Self Assessment return is required and whether there is any outstanding tax or a repayment due.

A Self Assessment return (SA100) for the period up to the date of death is generally required where the deceased:

• Was already registered for Self Assessment;
• Had income from rental property, a business, or investments that exceeded £2,500 in the tax year;
• Received income that was not taxed at source (such as foreign income);
• Had a tax liability from a prior year that remains unpaid.

If the deceased was employed under PAYE only and had no other income sources, HMRC may issue a P800 tax calculation directly without requiring a full SA100. This will either confirm the tax is settled or show a small underpayment or refund.

Income During the Administration Period

From the date of death until the estate is fully distributed, the estate is a separate entity for income tax purposes — distinct from both the deceased and the beneficiaries. Any income arising during this period must be accounted for to HMRC. Common sources include:

• Savings interest from bank or building society accounts;
• Dividends from shares or investment funds held in the estate;
• Rental income from properties that have not yet been sold or transferred;
• Income distributions from trusts in which the deceased had an interest.

The estate does not benefit from a personal allowance. All income is taxable from the first pound at the basic rate: 20% on non-dividend income and 8.75% on dividends. Many banks and financial institutions will deduct tax at source, but the executor must account for any shortfall or verify that deductions are correct.

For simple estates — where total income is below £500 in each tax year, the estate value does not exceed £2.5 million, the administration is completed within two years, and there are no foreign assets — HMRC may accept informal payment without requiring a formal SA900 estate tax return. Contact HMRC to confirm whether the simplified route applies before proceeding on this basis.

The SA900 Estate Tax Return

Where the estate is complex, the executor must register it with HMRC and file an SA900 (Trust and Estate Tax Return) each year that income arises. A complex estate is one where any of the following apply:

• Total income exceeds £500 in a tax year;
• The gross estate value exceeds £2.5 million;
• The administration period spans more than two tax years;
• The estate includes foreign income or assets.

The SA900 is filed annually, with a deadline of 31 January following the end of the relevant tax year (for online filing). The executor signs and submits the return in their capacity as personal representative. The SA900 reports:

• All income received by the estate during the administration period;
• Allowable expenses of administration deductible against income;
• Tax already deducted at source by banks and other payers.

R185 Certificates — Issuing Income to Beneficiaries

When the executor pays income to a beneficiary as part of their share of the estate (most commonly a residuary legatee receiving income that arose during the administration period), the executor must issue an R185 “Estate Income” certificate.

The R185 sets out:

• The gross amount of income to which the beneficiary is entitled;
• The tax deducted at the basic rate by the estate;
• The net amount actually paid to the beneficiary.

Beneficiaries include the R185 figures on their own Self Assessment tax return for the year in which the income is paid. The consequence for different taxpayers is:

• Non-taxpayers and basic-rate taxpayers — may be able to reclaim some or all of the tax deducted, since the estate will have paid 20% on income that may be covered by the beneficiary’s personal allowance or is within the basic rate band.
• Higher-rate and additional-rate taxpayers — will owe additional income tax on the gross estate income, as they are taxable at 40% or 45% but only 20% has been withheld by the estate.

Failing to issue R185 certificates leaves beneficiaries unable to report their income correctly to HMRC and can result in penalties being passed on to the beneficiary for incorrect or incomplete returns.

Common Mistakes Executors Make

Income tax is frequently the aspect of estate administration that causes the most difficulty. These are the mistakes HMRC sees most often:

1. Ignoring income tax entirely and distributing only capital. Executors sometimes distribute the estate’s capital assets without accounting for income generated during administration. This leaves an unpaid tax liability and potential personal exposure.
2. Failing to notify HMRC of the death. Not contacting the HMRC Bereavement Service means the deceased’s tax record remains open, Self Assessment obligations are missed, and HMRC may issue penalties for late filing of returns the executor did not know were required.
3. Not registering a complex estate for SA900. Where the administration period exceeds two years or income is above the threshold, the SA900 is mandatory. Failing to file attracts automatic penalties.
4. Failing to issue R185 certificates. Beneficiaries have no way to correctly declare estate income without an R185. Some executors do not realise this obligation exists at all.
5. Treating estate income as their own income. Income arising in the estate during administration belongs to the estate, not to the executor personally. Mixing funds creates both accounting difficulties and potential personal tax liability.
6. Distributing the estate before confirming HMRC has no outstanding claim. HMRC is a preferential creditor. Tax debts — including income tax, National Insurance, and any IHT that remains outstanding — must be settled before the residue is distributed to beneficiaries. An executor who distributes first and then receives a tax demand from HMRC may be personally liable for the shortfall.

Frequently Asked Questions

Related guides

• Estate administration in England and Wales
• Executor duties checklist
• Executor personal liability — what executors need to know
• Capital gains tax on inherited property UK
• Inheritance tax threshold UK 2026