Administering the estate
Whilst the executors or administrators are dealing with the estate they may be receiving income on investments (such as interest or dividends) while they are collecting all the information together to enable them to pay all the debts and distribute the remaining assets. They may also have to manage the deceased's business affairs and either wind a business up or transfer it to the successor. Any income received by the estate will be subject to the normal income tax rules, except there is no personal allowance available.
There is no capital gains tax on death. The people receiving the assets under the will or intestacy rules (the beneficiaries of the deceased's estate) are deemed to acquire the assets at their market value at the date of death. This is often the same as the probate value of the assets, as detailed in the return to HM Revenue & Customs providing details of the assets held at death. There may however be capital gains tax payable on assets that are sold by the executors (or administrators) if they increase in value above the probate value.
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The estate will need to prepare annual tax returns until such time as the administration is completed and all the assets distributed. The executors (or administrators) will need to retain sufficient assets in the estate to meet any tax liabilities.
For all estates, an inheritance tax return must be completed showing the amount of the estate at death, identifying jointly held assets, claiming any exemptions or reliefs from inheritance tax, and computing any inheritance tax payable by the estate.
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