Income Tax During Estate Administration: What Executors Must File

One aspect of estate administration that often catches executors off-guard is the obligation to deal with income tax arising during the period between the date of death and the final distribution to beneficiaries. This can last months or even years in complex estates, and during that time any income the estate receives is taxable. This guide explains what you need to do, when it applies, and how to keep things manageable.

Estate Income Is Not the Executor’s Personal Income

When the executor collects rent from a property in the estate, receives interest on the deceased’s bank accounts, or receives dividends on shares being held before sale, that income belongs to the estate — not to the executor personally. The estate is treated as a separate taxpayer for income tax purposes during the administration period.

This distinction matters for two reasons. First, the executor cannot offset estate income against their personal tax-free allowance (£12,570 for 2025/26). Second, the income is not reported on the executor’s personal self-assessment return — it requires a separate return in the estate’s name.

The administration period begins on the date of death and ends when the estate is fully administered — typically when all assets have been collected, debts paid, and distributions made to beneficiaries. In practice, many simple estates are administered within 6 to 12 months. Complex or disputed estates can take several years.

When You Do Not Need to File: The £500 Threshold

HMRC provides a simplified approach for small amounts of estate income. If the total gross income arising during the entire administration period (across all tax years) is £500 or less, you do not need to register the estate with HMRC or file an SA900 return.

Note that this is a cumulative threshold across the whole administration period, not a per-year figure. If the estate earns £200 in year one and £350 in year two, total income is £550 and the threshold is exceeded — you would need to file for both years.

Even where income is below £500 and no return is required, you should still keep a careful record of all income received. Beneficiaries have an entitlement to a statement of estate income, and HMRC can ask for records up to 20 years after the estate is administered.

Common types of estate income that count toward the threshold include:

• Bank and building society interest on estate accounts
• Rental income from any property in the estate
• Dividends from shares held during administration
• Income from trust assets where the estate has a beneficial interest

How to Register the Estate with HMRC

If the £500 threshold is exceeded, you must register the estate for self-assessment. The process is:

• Write to HMRC Trusts and Estates at: HMRC Trusts, Self Assessment, BX9 1AS, informing them that an estate requires registration for income tax during administration. Include the deceased’s full name, date of death, National Insurance number, and the executor’s contact details.
• HMRC will issue a Unique Taxpayer Reference (UTR) for the estate. This is separate from the deceased’s personal UTR and must be used on all correspondence and returns relating to the estate.
• You can also register online via HMRC’s Government Gateway service — search for “register an estate” on gov.uk.

The SA900 Trust and Estate Tax Return must be submitted by 31 January following the end of the relevant tax year (for online filing) or 31 October for paper filing. Late filing incurs penalties starting at £100. Any income tax owed by the estate must be paid by 31 January following the tax year.

Income Tax Rates That Apply to Estates in Administration

The tax rates that apply to estate income during administration are the basic rates — not the punitive higher trust rates that apply to discretionary trusts. This is an important distinction that often confuses executors and advisers alike.

• Bank interest and other savings income: 20% basic rate
• Dividends from UK companies: 8.75% dividend ordinary rate (for 2025/26)
• Rental income: 20% basic rate (after allowable deductions such as agent’s fees, repairs, and mortgage interest on a restricted basis)

The 45% additional rate and the 39.35% dividend trust rate do not apply to simple estates in administration. They apply to discretionary trusts, which are a different legal vehicle. Many executors are relieved to discover this when they seek advice.

Note that income tax already deducted at source (for example, tax deducted from bank interest or dividends) is taken into account when calculating the estate’s tax liability. Banks in the UK no longer routinely deduct tax from interest, but some investment income may still have tax deducted at source.

Keeping Records and Informing Beneficiaries

Detailed record-keeping throughout the administration period is not just good practice — it is a legal requirement. You should maintain a running schedule of all income received, broken down by type and tax year. This serves several purposes:

• SA900 filing: The return requires a breakdown of income by category (interest, dividends, rental, etc.) and the tax paid or payable on each.
• Beneficiary statements (R185): When you distribute income to beneficiaries (or when they are entitled to a share of estate income), you must provide them with an R185 Estate Income form. This tells each beneficiary their share of estate income and the tax already deducted, so they can account for it on their own personal tax return. Beneficiaries who are non-taxpayers may be able to reclaim tax deducted at source.
• Residuary beneficiaries: Where a beneficiary receives a residuary share (rather than a fixed legacy), they are entitled to a proportion of all estate income. This can be complex when there are multiple residuary beneficiaries with different shares.

A well-maintained estate income schedule also protects you as executor if beneficiaries later query the figures. Keep bank statements, dividend vouchers, rental agency statements, and any other income documents for at least 20 years.