💷 Every Kind of Tax After Someone Dies in the UK
When someone dies in the UK, their estate may have tax obligations that the executor (or administrator) needs to handle. These usually include:
- Inheritance Tax (IHT)
- Income Tax
- Capital Gains Tax (CGT)
This guide explains what each tax means, when it applies, and the practical steps you’ll need to take.
🌱 At a glance
- Inheritance Tax (IHT): Payable only if the estate is over £325,000 (or £500,000 with the residence nil-rate band). Must always be reported, even if no tax is due.
- Income Tax: Any unpaid tax up to the date of death must be settled. HMRC provides a final calculation.
- Capital Gains Tax (CGT): May apply if the estate sells property, shares, or other assets for more than their probate value.
- Trusts & gifts: Some lifetime gifts or trusts may also trigger reporting.
🏛️ 1. Inheritance Tax (IHT)
Inheritance Tax is not always payable, but the estate’s value must always be reported.
When does IHT apply?
- Estates worth more than £325,000 (nil-rate band)
- Estates up to £500,000 if everything is left to children/grandchildren (residence nil-rate band)
What is taxed?
- Property
- Savings and investments
- Certain gifts made within 7 years of death
Rates
- 40% above the threshold
- Reduced to 36% if 10%+ of the estate is donated to charity
Deadlines
- IHT forms due within 12 months of death
- Interest applies if payment is late, even while waiting for probate
💡 Even if no IHT is due, valuation paperwork is required to apply for probate.
📄 2. Income Tax
The executor must settle outstanding income tax up to the date of death.
Key steps
- Notify HMRC (via Tell Us Once or form R27)
- Submit a final self-assessment return if required
- Pay any tax owed — or reclaim overpayments
💡 HMRC will issue a final tax calculation once they’ve been notified.
💰 3. Capital Gains Tax (CGT)
CGT may apply if the estate sells assets that have risen in value since death.
Example: If the estate sells property or shares for more than their probate valuation, the gain may be taxed.
Allowances
- Estates can use an annual CGT allowance (currently £3,000)
📬 4. Trusts and Lifetime Gifts
Some situations require extra reporting:
- Gifts made within 7 years of death may count toward IHT
- Trusts created during the person’s lifetime may need tax reporting
💡 If trusts or overseas assets are involved, seek professional advice.
🛠️ Practical checklist for executors
| Step | Task |
|---|---|
| ✅ | Notify HMRC via Tell Us Once or directly |
| ✅ | Value the estate for IHT |
| ✅ | File IHT forms (IHT205 / IHT400) |
| ✅ | Check for outstanding/overpaid Income Tax |
| ✅ | Monitor CGT if selling property or investments |
🤝 Should you get help?
You can manage taxes yourself using HMRC and GOV.UK resources.
But consider support from a probate solicitor or accountant if:
- The estate is large or complex
- There are overseas assets or trusts
- You feel unsure about tax calculations