A quick guide to preparing estate tax returns in the UK

A quick guide to preparing estate tax returns in the UK

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When managing the affairs of a deceased person, Executors and Administrators face the crucial task of determining whether an estate tax return is necessary during the ‘Period of Administration’.

This is a vital aspect of probate services to ensure compliance with an estate’s tax obligations to HM Revenue & Customs (HMRC) and to determine whether the deceased’s assets may be subject to Inheritance Tax (IHT).

Filing estate tax returns

The law mandates that Executors and Administrators must submit a tax return detailing the deceased’s income and disposal of chargeable assets.

This is for the tax year within the period that the deceased passed away. Executors and Administrators must register the estate online by 5 October of the tax year for which the return is due to receive a Unique Taxpayer Reference (UTR).

The return can then be submitted either via paper form SA900 or electronically. The return must be submitted by 31 October in paper form, following the end of the tax year the person has died, or by 31 January if submitted digitally.

Failing to meet these deadlines will result in an automatic penalty of £100. You should ensure that all required documents and the tax return reach HMRC by the relevant deadline to avoid penalties.

Criteria for filing estate tax returns

An estate tax return must be completed and submitted if any of the following conditions are met:

  • The total Income Tax and Capital Gains Tax for the administration period exceeds £10,000.
  • The estate’s value was over £2.5 million at the time of death.
  • For deaths before 6 April 2016, more than £250,000 a year was generated from the estate’s asset sales.
  • For deaths on or after 6 April 2016, over £500,000 a year came from the estate’s asset sales.

It’s important to note that the estate tax return is distinct from any personal tax returns of the deceased, which cover any income from the estate up to the date of death.

Alternative to formal filing

For smaller estates that do not meet the above criteria, Executors and Administrators can opt for ‘informal arrangements’ by notifying HMRC directly.

This involves providing an assessment of due taxes along with details of the deceased and the person handling the estate.

For more advice on the above, get in touch with our experienced probate team.