Deceased Person Estate: UK Tax Duties for Executors and Administrators

Managing a deceased person estate involves more than obtaining probate and distributing assets to beneficiaries. Executors or administrators may need to deal with the deceased person’s final Income Tax position, Inheritance Tax (IHT), tax arising during the administration period and Capital Gains Tax (CGT) if estate assets are sold.

These obligations arise at different stages of the estate administration process. Understanding who is responsible, which returns are required and when tax must be paid can help personal representatives avoid interest, penalties and delays in distributing the estate. Wider personal tax guidance for estates in London can help executors understand how Income Tax, Capital Gains Tax and Inheritance Tax fit within the overall tax position.

What Taxes Can Apply After Death?

There are three main areas of Tax after Death that personal representatives should consider:

• Income Tax up to the date of death: the deceased person’s tax affairs may need to be finalised for the period from the beginning of the tax year to their date of death.
• Inheritance Tax: IHT may be payable depending on the value and composition of the estate and the exemptions and reliefs available.
• Income Tax and Capital Gains Tax during administration: the estate itself can receive taxable income or realise taxable gains before assets are distributed to beneficiaries.

These are separate calculations. Paying Inheritance Tax does not automatically settle the Income Tax or CGT responsibilities associated with administering the estate.

First Step: Tell HMRC About the Death

HMRC needs to establish the deceased person’s final tax position. In many cases, information about the death is passed to government departments through the Tell Us Once service, where available.

HMRC may then calculate whether the deceased:

• Had Income Tax outstanding.
• Had paid too much Income Tax and is due a refund.
• Had income that still needs to be reported.
• Needs a Self Assessment tax return completed for the period before death.

Personal representatives should retain the deceased person’s tax records, including payslips, P60s, pension statements, bank interest information, investment records and details of property or self-employment income.

Do You Need to File a Tax Return for a Deceased Person UK?

A tax return for a deceased person UK may be required where HMRC asks the personal representatives to complete one or where outstanding income or gains need to be reported through Self Assessment.

The return deals with the deceased person’s own tax affairs up to the date of death. This should not be confused with tax arising later while the estate is being administered.

For example, if someone dies part-way through a tax year after receiving rental income, investment income or self-employment profits, their final tax position may still need to account for those amounts up to their date of death.

Value the Deceased Person’s Estate

Executors and administrators need to establish the assets and liabilities of the estate. Accurate valuations are particularly important for Inheritance Tax and can also provide the starting values needed for subsequent Capital Gains Tax calculations.

Assets can include:

• Property and land.
• Bank and building society accounts.
• Shares and other investments.
• Business interests.
• Personal possessions of material value.
• Certain lifetime gifts.
• Assets held overseas.

Assets can also include company shares acquired through employment-related awards. Where an individual held substantial equity compensation, estate planning for RSUs in London can help distinguish shares already owned from outstanding awards whose treatment may depend on the employer’s plan rules.

Allowable debts and liabilities should also be identified. Personal representatives should use appropriate market values at the date of death rather than relying on historic purchase prices.

Inheritance Tax on a Deceased Person Estate

Inheritance Tax is one of the most significant potential deceased estate taxes.

For 2026/27, the standard IHT nil-rate band remains £325,000. A residence nil-rate band of up to £175,000 may also be available where a qualifying residence is passed to direct descendants and the relevant conditions are satisfied.

Transfers to a spouse or civil partner are generally exempt from IHT, subject to the applicable rules. Unused nil-rate bands may also potentially be transferred between spouses or civil partners.

Where IHT is payable, the standard rate is generally 40% on the taxable portion of the estate after available exemptions, reliefs and allowances have been considered. Executors should also understand the IHT treatment of pension death benefits in London where the deceased held unused pension funds or pension-related death benefits.

When Does Inheritance Tax Have to Be Paid?

Inheritance Tax normally needs to be paid by the end of the sixth month after the month in which the person died. Interest can arise where tax is paid late.

Some assets, including certain property, may qualify for payment of IHT by instalments. However, specific conditions apply and interest may be charged on outstanding instalments.

In practice, some Inheritance Tax may need to be paid before probate or letters of administration can be obtained. Executors should therefore consider how the estate will fund the liability before assuming assets can immediately be distributed.

Tax During the Estate Administration Period

The period between the date of death and the completion of the estate administration is known as the administration period.

During this time, the estate can continue to generate income. Examples include:

• Interest on bank accounts.
• Dividends from shares.
• Rental income from property.
• Other investment income.

This income belongs to the estate during administration and can create a separate Income Tax liability for the personal representatives.

This distinction is particularly important when managing estate taxes for deceased individuals: income earned before death forms part of the deceased person’s final tax position, whereas income arising after death generally belongs to the estate during administration.

Does an Estate Need to Register with HMRC?

Some estates need to register with HMRC as complex estates and complete Trust and Estate Self Assessment returns.

For deaths on or after 6 April 2024, an estate is generally regarded as complex for Income Tax and Capital Gains Tax reporting purposes where:

• The total Income Tax and Capital Gains Tax due for the entire administration period exceeds £10,000.
• The estate is worth more than £2.5 million at the date of death.
• The value of assets sold during any tax year exceeds £500,000 for deaths on or after 6 April 2016.

Where an estate does not meet the complex-estate conditions, personal representatives may be able to use HMRC’s informal payment arrangements instead of completing a full Trust and Estate Tax Return.

Capital Gains Tax When Estate Assets Are Sold

Capital Gains Tax can arise when personal representatives sell or otherwise dispose of estate assets during the administration period.

Assets are generally treated as being acquired by the personal representatives at their market value at the date of death. CGT is therefore normally concerned with growth in value occurring between the date of death and the subsequent disposal.

For example, if shares are valued at £100,000 at death and are subsequently sold by the executors for £115,000, the relevant gain broadly starts with the £15,000 increase rather than the deceased person’s original purchase price, before allowable costs and other adjustments.

CGT Annual Exempt Amount for Estates

Personal representatives may be entitled to the Capital Gains Tax Annual Exempt Amount during the administration period.

The exemption is generally available for:

• The tax year in which the person dies.
• The following two tax years.

For 2026/27, the individual Annual Exempt Amount is £3,000.

If the administration continues beyond the permitted period, the estate will generally no longer receive an Annual Exempt Amount. This can make the timing of asset disposals relevant where an estate takes several years to administer.

Selling UK Property During Estate Administration

Special reporting requirements can apply if personal representatives sell UK property and Capital Gains Tax becomes payable.

Where a reportable gain arises on the disposal of UK residential property, the personal representatives may need to report the disposal and pay the CGT within the applicable 60-day deadline.

This obligation should be considered at the point of sale rather than waiting until the estate’s annual tax affairs are prepared.

Tax When Assets Pass Directly to Beneficiaries

Not every transfer of an estate asset to a beneficiary creates Capital Gains Tax.

Where personal representatives transfer an asset to a beneficiary as part of the administration of the estate, there is generally no CGT charge simply because the asset is appropriated or transferred to that beneficiary.

The beneficiary normally takes the asset at the relevant probate value for CGT purposes. A future disposal by the beneficiary can then create a gain or loss based on the applicable acquisition value. Different rules apply to the tax on inherited private pensions, so pension benefits should be considered separately from assets passing directly through the estate.

This means executors may need to consider whether assets should be sold by the estate or transferred to beneficiaries before sale, although decisions should reflect the terms of the will, administration requirements and beneficiaries’ circumstances rather than tax alone. Understanding the requirements for a valid will can also help clarify why the will’s legally effective instructions are central to how estate assets should be administered and distributed.

Keep Records of Estate Income, Gains and Tax

Accurate records are essential throughout the administration period. Personal representatives can be required to explain the estate’s tax calculations to HMRC and provide beneficiaries with information relevant to their own tax affairs.

Records should generally include:

• The deceased person’s final tax documents.
• Date-of-death asset valuations.
• Bank and investment statements.
• Property valuations and sale documents.
• Details of estate income.
• Capital gains calculations.
• Inheritance Tax calculations and forms.
• Evidence of tax payments.
• Records of distributions to beneficiaries.

Do Not Distribute the Estate Too Early

Executors and administrators should establish the estate’s liabilities before making final distributions to beneficiaries. For deaths affected by the pension and IHT changes from April 2027, personal representatives may also need to consider how unused pension funds and relevant death benefits affect the estate’s Inheritance Tax position.

If assets are distributed and an unexpected tax liability subsequently arises, the personal representatives may face difficulties recovering sufficient money to pay HMRC. Where beneficiaries are considering changing a will after death, this should be addressed before the relevant assets are distributed and the administration is completed.

Before final distribution, it is sensible to establish that:

• The deceased person’s final Income Tax position has been resolved.
• Inheritance Tax has been calculated and paid where required.
• Income and gains arising during administration have been reported.
• Known debts and administration expenses have been settled.
• Appropriate provision has been retained for outstanding liabilities.

Common Tax Mistakes When Administering an Estate

• Confusing the deceased person’s final tax affairs with the estate’s administration-period tax.
• Using historic asset costs instead of obtaining appropriate date-of-death valuations.
• Assuming Inheritance Tax is the only tax that can arise after death.
• Failing to report rental, dividend or interest income received during administration.
• Missing Capital Gains Tax reporting deadlines when estate property is sold.
• Assuming the CGT Annual Exempt Amount continues indefinitely throughout a lengthy administration.
• Failing to determine whether the estate meets HMRC’s complex-estate criteria.
• Distributing all available cash before outstanding tax liabilities have been established.

Completing the Tax Affairs of a Deceased Person Estate

Managing a deceased person estate requires personal representatives to separate several different tax responsibilities. The deceased person’s Income Tax affairs up to the date of death must be finalised, Inheritance Tax should be considered when valuing the estate, and income or capital gains arising during administration may create further reporting and payment obligations.

The complexity increases where an estate contains property, business interests, overseas assets, significant investments or assets that are sold before distribution.

Keeping accurate valuations and financial records from the outset makes it easier to calculate deceased estate taxes, complete any required tax return for a deceased person UK, report administration-period liabilities and establish what can safely be distributed to beneficiaries.

Disclaimer: This article provides general information about UK tax when administering a deceased person’s estate for 2026/27. The precise tax and probate requirements depend on the value and composition of the estate, the date of death, lifetime gifts, available reliefs and the circumstances of the beneficiaries.

Case Study: Managing Tax Responsibilities During Estate Administration

Rebecca approached our Farringdon office after being appointed executor of her late father’s estate. The estate included his main residence, a rental property, investment accounts and substantial cash savings. She initially expected that once the Inheritance Tax position had been dealt with, the remaining assets could be distributed to the beneficiaries.

Cigma Accounting reviewed the estate and explained that several separate tax responsibilities needed to be considered. We first helped establish her father’s final Income Tax position up to the date of death, including rental and investment income that may still need to be reported to HMRC.

We then considered the estate valuation and potential IHT liability, including the available nil-rate bands and relevant exemptions. Accurate date-of-death valuations were obtained for the property and investments, which were also important for determining the starting values for future Capital Gains Tax calculations.

During the administration period, the rental property continued generating income and some investments increased in value. We therefore helped Rebecca distinguish this estate income and subsequent capital growth from her father’s pre-death tax affairs. We also considered the CGT implications before investments were sold and whether the estate’s level of income, gains and assets created additional HMRC reporting requirements.

As part of the wider work, Cigma Accounting assisted with estate tax reporting, Inheritance Tax, Capital Gains Tax, property income and personal tax matters. We also advised Rebecca to retain sufficient funds within the estate until outstanding tax and administration liabilities had been established rather than distributing everything immediately.

Rebecca was left with a clearer understanding of the estate’s tax obligations, the records that needed to be maintained and how much could safely be distributed once the outstanding liabilities had been resolved.