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When someone dies it's important to sort out their tax and National Insurance as soon as possible. There may be tax to pay or a rebate due. The 'personal representative' (that is, the executor or administrator) sorts out the deceased person's tax affairs, as well as the rest of the estate.
When someone dies, the personal representative needs to contact the deceased person's Tax Office as soon as possible. The Tax Office will tell you what you need to do and send you certain tax forms.
You may find details of the deceased person's Tax Office among their papers. If you can't, contact your nearest Tax Office or HM Revenue & Customs (HMRC) Enquiry Centre and give them the deceased person's name, address and, if possible, their National Insurance number.
If the person paid tax through PAYE, their Tax Office will send you form R27 'Potential repayment to the estate' to complete. You can also download this form below.
If they paid tax through Self Assessment, you can opt to fill in form R27 in full - or only in part and then complete a Self Assessment tax return immediately or at the end of the tax year. (If you choose to complete form R27 in full, the Tax Office may still need to ask you to fill in a tax return as well later.)
Form R27 is used to calculate whether any tax is owed or a rebate is due. It must be signed by the personal representative.
The form asks about the deceased person's income and capital gains, including:
The Self Assessment tax return comes with help notes. The information you'll need to supply is similar to that for form R27, but you will also be asked about the deceased person's:
You need to send the tax return back by the later of:
Either way, HMRC will calculate the deceased's tax for you if you wish. However, bear in mind that if tax is owed you still need to make any payment by the above deadlines. HMRC can only guarantee to let you know how much is due and still give you sufficient time to pay on time if they receive the return no later than:
If you send the return in later and haven't calculated the tax you can estimate any tax due and enclose a payment if relevant. But if this is below the actual amount due, interest would be payable on the difference if it's received after the final deadlines. If no payment is made by the final deadline and it turns out that tax is due you may incur a late payment charge as well as interest.
Form R40 is a special form for claiming tax rebates. You can fill this in right away - or later on when you know that a refund is definitely due. The form's available from the Tax Office or you can download it below.
It's important to tell banks and building societies as soon as possible that the account holder has died because:
Tax will be deducted from the account until the estate has been sorted out.
The deceased person will get their full tax-free personal allowance for the year of their death. They will also get a full year's entitlement to any blind person's or married couple's allowance that was due to them for the full year.
If they did not receive enough income to use the whole of the blind person's or married couple's allowances, the personal representative can arrange for the unused allowances to be transferred to a surviving spouse or civil partner. Ask their Tax Office for the forms to do this.
If the deceased was employed no National Insurance contributions are payable on any earnings paid by their employer after the date of their death.
If the deceased was self-employed you will need to contact the National Insurance Contributions Office so that they can ensure that existing Direct Debit or other arrangements for collecting their Class 2 National Insurance contributions are cancelled. Call the helpline on 0845 915 4655 (open Monday to Friday, 8.00 am to 5.00 pm).
Any Class 4 contributions will be dealt with automatically through their Self Assessment tax return.
As the personal representative you may have to pay CGT if money is made from selling the property or possessions of the deceased. However, you are treated as acquiring those assets at their market value at the date of death so CGT can only be payable on them if you disposed of them for more than this value - and only if the total gains exceed a limit called the 'annual exempt amount' (AEA). To check AEA and CGT rates and to find out how to calculate any CGT that may be due, use the CGT link below.
If you transfer an asset to a beneficiary under the terms of the deceased's will or the rules of intestacy (where there is no will), the beneficiary is treated as having acquired the asset at its market value at the date of death and no CGT is payable on it by you.
A personal representative gets the same AEA as an individual for the tax year of death and the two subsequent years (thereafter, none). The AEA for the tax year 2006-2007 is £8,800. CGT is charged at the rate applicable to trusts - currently 40 per cent.
Ask HMRC how you should declare gains that may be liable to CGT. It may not be necessary to fill in a Self Assessment form if the deceased didn't actually file one.
Inheritance Tax is payable if the estate - the money, property and possessions left by the deceased - is above a certain value (after exemptions). The executor or administrator has to make sure the tax is paid. If Inheritance Tax is due you normally need to have paid at least some of this before you can apply for probate. Read more in our related articles below.
You may find it useful to ask a solicitor or accountant for help and advice. They will charge for this service. The deceased person'sTax Office can also offer you certain advice on what you need to do. You can also get free help from the Citizens Advice Bureau and (on Inheritance Tax matters) from the 'Tax and Probate Helpline' on 0845 302 0900 (open 9.00 am to 5.00 pm, Monday to Friday).
