What are the Tax Responsibilities of Personal Representatives in the UK?

Question from KAL, What are the Tax Responsibilities of Personal Representatives in the UK?

Answer from AI:

In the UK, Personal Representatives (PRs) are responsible for managing the estate of a deceased person. This includes paying any taxes due on the estate. The question presents four statements about the tax responsibilities of PRs, and asks which one is incorrect.

Understanding the Tax Responsibilities of PRs

The tax responsibilities of PRs can be complex, and it’s important to understand them fully. Here’s a general explanation of each statement:

1. The PRs are not liable to income tax on income of an estate. This statement is incorrect. PRs are indeed liable for income tax on the income of an estate. This includes income from dividends on shares and interest from money in a building society account. The PRs must report this income to HM Revenue and Customs (HMRC) and pay any tax due.
2. The PRs are not liable to higher rate income tax on income of an estate. This statement is also incorrect. PRs are liable for income tax on the estate’s income at the basic rate, which is currently 20%. However, if the estate’s income is large enough, it may be subject to higher rate tax.
3. The PRs must give the residuary beneficiary a certificate of deduction of income tax. This statement is correct. PRs must provide the residuary beneficiary with a R185 (Estate Income) form, which shows the income the estate has received and any tax that has been deducted.
4. The beneficiary may have to pay additional income tax on the £4,000 he receives from the PRs. This statement is correct. If the beneficiary is a higher or additional rate taxpayer, they may have to pay more tax on the income they receive from the estate.

Seeking Legal Advice

Tax law can be complex, and the penalties for getting it wrong can be severe. If you’re a PR and you’re unsure about your tax responsibilities, it’s a good idea to seek professional advice. A solicitor or tax adviser can help you understand your obligations and ensure you meet them.

For more information, you can refer to the HMRC guidance on completing a Self Assessment tax return after someone dies.

Remember, this information is a general guide and may not apply to your specific situation. Always consult with a legal professional for personalized advice.