Tax during executorship period

[morestout]

Hi,
My late wife's executorship period spanned the tax years 16/17 and 17/18. HMRC asked me to split the income/profit between the two tax years. The executorship period covered the last two months of the first tax year and the first 2 1/2 months of the second. I had already completed a tax return up to the date of her death and there was no tax payable as the income was less than the PA.
What allowances if any does the estate get for the tax years covering these two short periods. Has her PA been used up for 16/17 or is this a separate taxable entity and entitled to another one. If there is a second PA for 16/17 can some of this be used to absorb the fact that the capital gain is greater than the CGT allowance, if indeed the estate qualifies for a CGT allowance in 16/17. Her ex-ISAs made capital profits as the market went up and there were dividends. Thanks[/quote]

[PinkDalek]

Brief reply only, as you didn't get a response when you first posted at Legal issues.

Hi,
My late wife's executorship period spanned the tax years 16/17 and 17/18. HMRC asked me to split the income/profit between the two tax years. The executorship period covered the last two months of the first tax year and the first 2 1/2 months of the second. I had already completed a tax return up to the date of her death and there was no tax payable as the income was less than the PA.
What allowances if any does the estate get for the tax years covering these two short periods. Has her PA been used up for 16/17 or is this a separate taxable entity and entitled to another one. If there is a second PA for 16/17 can some of this be used to absorb the fact that the capital gain is greater than the CGT allowance, if indeed the estate qualifies for a CGT allowance in 16/17. Her ex-ISAs made capital profits as the market went up and there were dividends. Thanks

There is no personal allowance for the Estate itself which is, as you suggest, a separately taxed entity. See also the link at the foot of this post***.

There is a full Annual Exempt Amount available for CGT purposes (from memory for the first tax year period and the next two tax years which should cover the position) which you can check here:

Capital Gains Tax rates and annual tax-free allowances
Updated 6 April 2017
https://www.gov.uk/government/publicati ... allowances

Extract:

2. Tax-free allowances for Capital Gains Tax

The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gain each year before you have to pay tax. Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance.

There’s one Annual Exempt Amount for:

most individuals who live in the UK
executors or personal representatives of a deceased person’s estate
trustees for disabled people ...

Individuals, personal representatives and trustees for disabled people

2016 to 2017 £11,100
2017 to 2018 £11,300

*** This looks like a pretty good summary of the position, which includes the taxation of dividends etc in the Estate (note no dividend allowance):

https://www.litrg.org.uk/tax-guides/ber ... nistration


Note that the beneficiaries may have to pay further Income Tax based upon the income received from the Estate. You may also want to ask about Estate accounts etc and look at:

Trusts and estates: statement of income from estates (R185) (estate income)
https://www.gov.uk/government/publicati ... ate-income