Final Tax Return After Death in Wales — What the Executor Owes HMRC

Dealing with HMRC after a death involves at least two separate tax obligations that are frequently confused: the deceased's final personal tax return (covering income and capital gains up to the date of death) and the estate's own tax position during administration. Both are the executor's responsibility, and missing either can result in penalties and interest from HMRC.

Tax Obligation 1 — The Deceased's Final Tax Return

The deceased owes income tax and capital gains tax on all income and gains up to the day they died. This is their final personal tax liability and must be settled as part of the estate.

Who files it: The executor or administrator of the estate, on behalf of the deceased.

When: HMRC must receive the final personal tax return by 31 January following the tax year of death (if self-assessment applies) or by 31 January the following year. If the deceased was on Pay As You Earn (PAYE) and had no self-assessment obligation, HMRC will typically calculate the final tax position automatically after receiving notification through the Tell Us Once service — and either issue a refund or request a payment.

Common income to report in the final year:

• Salary and wages (from 6 April to the date of death)
• Pension income (state and private)
• Rental income from property
• Interest from bank accounts and savings
• Dividends from shares
• Any trading or self-employment income

Capital gains: If the deceased sold shares, property, or other assets before they died and made a gain above the annual CGT allowance for that year, CGT is due. Note: assets that pass to beneficiaries at death are not subject to CGT at the time of death — they receive a "rebasing" to the value at the date of death.

Getting HMRC access: If the deceased had an online personal tax account, the executor cannot access it directly. Contact HMRC's bereavement service or Probate & Inheritance Tax helpline to manage the final tax position. If the deceased used an accountant, they can often liaise with HMRC on the executor's behalf.

Tax Obligation 2 — Inheritance Tax (IHT)

Inheritance tax is assessed on the total value of the estate at the date of death. This is separate from the deceased's income tax.

When IHT400 is required: If the estate exceeds the excepted estate thresholds (broadly: gross estate under £325,000, or under £650,000 if transferring a predeceased spouse's unused nil-rate band, or under £3 million if passing everything to a spouse/charity), it is an "excepted estate" and no full IHT return is needed. Instead, the executor uses HMRC's online checker to produce the three estate values required for the probate application.

For taxable estates, the full form IHT400 must be submitted to HMRC.

The 20-day rule: After HMRC receives the IHT400, they require approximately 20 working days to process it and issue a unique reference code. You cannot submit the probate application to HMCTS before receiving this code. This is one of the most common reasons probate applications are rejected or delayed. Factor this 20-working-day window into your timeline — it effectively adds a month to the overall probate process.

Payment deadline: Inheritance tax is generally due by the last day of the sixth month after the month in which the death occurred. For example, if the death was in January, IHT is due by 31 July. Interest accrues at the Bank of England base rate plus a further statutory rate after this point. Late payment also attracts penalties.

Executors can pay IHT from estate funds — and if the estate does not have liquid cash available before probate, form IHT423 authorises the bank to pay HMRC directly from the deceased's frozen accounts. This is the standard route for estates where most value is tied up in a property that cannot be sold until probate is granted.

Tax Obligation 3 — Estate Income Tax During Administration

The estate itself can earn income during the administration period — rental income from a property, dividends from shares held in the estate, interest on savings. This income is taxable and must be reported.

Form R185 and SA900: The executor may need to file an SA900 Trust and Estate Tax Return for each tax year during which the estate receives income. HMRC issues these automatically once they are aware an estate is being administered.

The estate's tax rate: Income earned by the estate is taxed at the basic rate (20% for most income types). If you distribute income to beneficiaries during administration, they receive it with a tax credit for the 20% already paid, and may be able to reclaim some or all of this if they are basic-rate taxpayers or non-taxpayers.

Capital gains during administration: If the executor sells estate assets (shares, property) for a gain above the estate's CGT annual allowance (currently £1,500 for estates — verify on GOV.UK), the estate owes CGT on the gain. The base value is the probate value (value at date of death), so only gains above this are taxable.

Key HMRC Contacts for Estates in Wales

• Bereavement line: 0300 200 3300 (for PAYE-only taxpayers — notify of death and request any final tax calculation)
• Probate and Inheritance Tax helpline: 0300 123 1072 (for IHT400, probate queries)
• Self-assessment: 0300 200 3310 (for self-assessment final returns)

Practical Timeline for Tax

Getting the HMRC timeline right is one of the most financially significant things an executor does. Mistakes cost the estate money — and the beneficiaries bear the loss.

The Wales Estate Settlement Guide includes a tax timeline checklist, guidance on completing the excepted estate HMRC checker, and step-by-step instructions for completing and submitting the IHT400 where required.

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