During the Probate and Administration process, families often focus on Inheritance Tax. However, Income Tax might also be relevant. Not every Estate will have an Income Tax liability, but it should be reviewed before distributing money to beneficiaries.
After someone dies, Income Tax doesn’t stop. It may still be due on income received before death and, in some cases, during Administration. HMRC will calculate any tax owed or refund due, and the calculation is usually handled by the Executor or Administrator.
This blog is for Executors or Administrators and outlines your responsibilities to make sure the deceased person’s tax affairs are brought up to date. This may include checking whether Income Tax is owed, whether a refund is due, or whether HM Revenue & Customs needs further information.
For personalised advice on Inheritance Tax and Probate, please contact the team at Redwood Financial.
At a glance: What happens to Income Tax after death
When someone dies, Executors should be aware that:
- Income Tax may still be due up to the date of death.
- The Estate may be entitled to an Income Tax refund.
- A final Self-Assessment tax return may be needed.
- The Estate may need to pay Income Tax during Probate.
- HMRC may need details of income received before and after death.
- Executors should not distribute the Estate until tax matters have been reviewed.
Does Income Tax Stop When Someone Dies?
Income Tax does not simply stop when someone dies.
The deceased person’s Income Tax position still needs to be reviewed from the start of the tax year, which begins on 6 April, up to the date of death.
HMRC may need to check any income received before the person died, including:
- Salary or wages
- State Pension payments
- Private or workplace Pensions
- Savings interest
- Dividend income from shares or Investments
- Rental income from property
- Self-employed income
- Other taxable income
If the person paid too much Income Tax before they died, the Estate may be entitled to a tax refund. In some cases, further Tax may be due, especially if income has not yet been reported to HMRC.
Who Is Responsible for a Deceased Person’s Tax Affairs?
The deceased’s nominated Executor, or an Administrator if there is no Will, is responsible for dealing with the deceased person’s tax affairs.
They must gather financial information, contact HMRC if required, and check whether tax is owed or a refund is due. They must ensure any outstanding tax is paid before the Estate is distributed to the Beneficiaries.
This may involve reviewing income, Pensions, Investments, property, business interests, previous tax returns, and correspondence from HMRC, making it a significant responsibility. This is well worth considering if you are currently drafting your Will and choosing an Executor.
Do Executors Need to Contact HMRC After Someone Dies?
Executors must notify HMRC of the death for tax purposes. This can be done by using the government’s Tell Us Once service.
However, you shouldn’t assume that HMRC has a complete picture of the deceased’s finances. You may still need to provide information about any other income, savings or assets so that HMRC can calculate the right amount of Income Tax.
If the deceased was registered for Self-Assessment, HMRC may also require a final tax return.
What If the Deceased Completed Self-Assessment Tax Returns?
If the deceased person completed Self-Assessment tax returns, further action may be needed.
This often applies where the person:
- Was self-employed
- Received rental income
- Had significant Savings or Investment income
- Received income from abroad
- Was a company director
- Had already been asked by HMRC to complete tax returns
HMRC may require a final Self-Assessment tax return covering the period from 6 April to the date of death.
In some cases, HMRC may also ask for outstanding tax returns from previous years if these were not submitted during the person’s lifetime.
Does an Estate Pay Income Tax During Probate?
Income Tax may be due during the Probate period if the Estate continues to receive income, such as:
- Interest from bank or building society accounts
- Dividends from shares or Investments
- Rental or business income
Unlike an individual, an Estate does not have a Personal Allowance. So for any income received during the Administration period (which usually runs from the day after death until the Estate is fully distributed), Executors should report this to HMRC and pay any tax due.
How Is Income Tax Different from Inheritance Tax and Capital Gains Tax?
Income Tax, Inheritance Tax and Capital Gains Tax may all apply after someone dies. It’s important not to assume that dealing with one tax means all tax matters have been covered. Each needs to be considered separately as part of the wider Estate Administration process.
| Tax | When it may apply | Main 2026/27 rates | Key allowances and reliefs |
|---|---|---|---|
| Income Tax | On income received before death and income generated by Estate assets during Administration, including Pensions, interest, dividends, rent and business income. | Before death, rates depend on the type and amount of income. Estate income is generally taxed at 20% or the applicable dividend rate. | The deceased may have a £12,570 Personal Allowance and £500 Dividend Allowance. Personal Representatives do not normally receive a Personal Allowance for Estate income. |
| Inheritance Tax | On the taxable value of the Estate and, in some cases, lifetime gifts or transfers into trusts. | Usually 40%, reduced to 36% where the charitable giving conditions are met. Certain lifetime trust transfers may be subject to a 20% tax. | £325,000 Nil Rate Band and up to £175,000 Residence Nil Rate Band. Spouse, civil partner and charity exemptions may apply, along with reliefs for qualifying business and agricultural assets. |
| Capital Gains Tax | Where the deceased disposed of an asset before death, or Estate assets rise in value and are sold during Administration. There is normally no CGT simply because an asset passes on death. | Individuals generally pay 18% or 24%. Personal Representatives generally pay 24% on Estate gains. | £3,000 Annual Exempt Amount. Estate assets are generally valued at their market value on the date of death. |
Can Income Tax Delay Probate or Estate Administration?
Income Tax can sometimes delay Estate Administration, while Executors check that all the deceased’s taxes have been settled.
HMRC may also need time to review the information and calculate any Income Tax due.
Executors might consider holding back a sensible reserve until the Estate’s final tax position is clear, as distributing everything too early can leave them personally responsible for tax or other liabilities that arise later.
What Happens If Income Tax Is Overlooked?
Executors have a legal responsibility to administer an Estate correctly.
If assets are distributed to Beneficiaries before Income Tax liabilities have been paid, the Executor could become personally responsible for settling any unpaid tax.
What Records Should Executors Keep?
Executors should keep clear records of the deceased person’s income, assets, and tax position, including:
- P60s and payslips
- Pension statements
- Bank and building society statements
- Investment statements
- Dividend vouchers
- Rental property records
- Business accounts
- Previous Self-Assessment tax returns
- HMRC correspondence
Good record-keeping can make it easier to deal with HMRC and reduce the risk of delays during Probate.
Common Mistakes Personal Representatives Should Avoid
Whether acting as an Executor or Administrator, Personal Representatives should avoid:
- Distributing the Estate too quickly before tax, debts and other liabilities are settled.
- Assuming HMRC already has all the information it needs.
- Overlooking income received after death, including bank interest, dividends and rental income.
- Failing to check whether a final Self-Assessment return is required.
- Not setting aside enough money for taxes, professional fees, and Estate expenses.
- Missing smaller income sources during Probate and Administration.
- Keeping incomplete records of the deceased’s finances and the Estate’s transactions.
How Redwood Financial Can Help
Dealing with Probate and Estate Administration is a significant task, especially when tax matters are involved.
At Redwood Financial, we help families understand what needs to be done, what information may be required, and how to move through the process carefully and correctly.
If you are acting as an Executor or Administrator, we can help you understand the next steps and make sure important tax and Estate Administration matters are properly considered.
Contact us today to request a complimentary 10-minute telephone meeting
Further reading: How long does Probate take?
Frequently Asked Questions about what happens to Income Tax when someone dies
What rate of Income Tax does an Estate pay?
An Estate does not have a Personal Allowance, so income received during the administration period may be taxable. In the 2026/27 tax year, Estate income is generally taxed at 20% for most income, such as interest or rent, and 10.75% for dividend income. Executors should check the current rates before reporting income to HMRC.
Who signs the final tax return for a deceased person?
The final tax return is usually signed by the Executor or Administrator dealing with the Estate. They are responsible for ensuring the information is complete and accurate, based on the deceased’s income and records up to the date of death.
Can an Estate receive income after the date of death?
Yes. An Estate can receive income after the date of death, including bank interest, dividends, rental income or business income. This belongs to the Estate during the administration period and may need to be reported to HMRC.
Can late filing penalties apply if Income Tax returns are not submitted on time?
Executors must file Income Tax returns for the deceased’s estate if they are outstanding. Late-filing penalties and interest may apply if a required return is not submitted by HMRC’s deadline. While 31 January is the standard deadline for online Self Assessment tax returns, HMRC provides flexible extensions when filing a final tax return on behalf of someone who has died. The deadline for a deceased person’s final return is usually stated in the letter accompanying the form.
Does a surviving spouse or civil partner have to pay the deceased person’s Income Tax?
A surviving spouse or civil partner is not usually personally responsible for the deceased person’s Income Tax. Any tax due is normally paid from the Estate before assets are distributed, unless there are unusual circumstances or joint liabilities
Can an Estate Receive an Income Tax Refund?
Yes. If someone dies part-way through the tax year, they are still entitled to their full annual Personal Allowance. This means it is quite common for an Estate to receive an Income Tax refund.
Does All Estate Income Need to Be Reported to HMRC?
Not always. If the Estate’s total income from all sources is £500 or less in a tax year, no Income Tax is normally due, and it doesn’t need to be reported to HMRC.
