When someone dies, families often feel unsure about their HMRC obligations.
Two questions come up again and again:
“Do we need to file a Tax Return for them?”
“And what happens to income after the date of death?”
The confusion is understandable — HMRC use two different systems:
- The Final Tax Return
- The Estate Tax Return (Estate Administration Period)
They serve different purposes, and not everyone needs both.
This guide explains the difference in simple, clear steps, so you know exactly what HMRC expect and when each Return is required.
🎥 If you prefer to watch rather than read, here is the full video guide.
You can now continue with the full written guide below.
1. What Is the Final Tax Return?
The Final Tax Return covers the period:
From 6 April → up to the date of death
It reports the deceased’s income received while they were alive, such as:
- Employment income
- Self-employment income
- Pension income
- Rental income
- Interest
- Dividends
- Benefits
- Capital gains before death
Is the Final Return always required?
No.
It’s required if the person:
- Was already in Self Assessment
- Had undeclared income
- Had more than £10,000 in savings/investment income
- Had rental income
- Had large Capital gains before death
- Had complex Tax affairs
- Received the High Income Child Benefit Charge
HMRC will usually write to the Executor, but not always.
If in doubt, it’s safer to file.
2. What Is the Estate Tax Return?
After someone dies, their Estate may continue to receive income.
This period is called:
The Administration Period
(the time between the date of death and final distribution of the Estate).
During this time, the Estate itself is treated like a mini-taxpayer.
The Estate may receive:
- Rent (from a buy-to-let or HMO)
- Interest
- Dividends
- Sale proceeds of assets
- Premium Bond winnings
- Insurance payouts with taxable elements
If the Estate receives taxable income, it may require:
- Estate Reporting via informal calculation, or
- Full Estate Tax Return (SA900), depending on the case
Many families don’t know this — and miss the reporting entirely.
3. When Does the Estate Need to File a Tax Return (SA900)?
HMRC require a full Estate Tax Return if:
- The Estate receives rental income
- Annual Estate income exceeds £10,000
- CGT is due on any Estate asset before transfer to beneficiaries
- HMRC specifically request one
- There are Overseas assets
- There are complex investments
- There are multiple beneficiaries with split income
Smaller Estates may be handled with HMRC’s informal “low-income estate” rules — but this must be agreed with HMRC, not assumed.
4. What Happens If the Estate Receives Rental Income?
This is the most common scenario you deal with.
If the deceased owned a rental property:
- Rent does not stop
- Rent received after the date of death belongs to the Estate, not the individual
- Allowable expenses can still be claimed
- Losses can be carried forward within the Estate
- The Executor must keep rental accounts
You can also read my guide on Rental Losses and Carrying Them Forward, which explains how losses work during probate.
Once the property is transferred to the beneficiaries:
- They become the new Landlords
- They must declare rental income going forward
- Their CGT starts from the Probate value (not original purchase price)
5. Do You Need to Report Capital Gains After Death?
Possibly.
CGT before death goes on the Final Return.
CGT after death (when the Estate sells an asset) is reported by the Estate, not the beneficiaries.
Common Taxable Estate gains:
- Selling a rental property during probate
- Selling shares
- Selling a second home
- Selling an overseas property
Once the asset is transferred to the beneficiaries, future gains become their responsibility.
My blog on Selling an Inherited Property – CGT Explained, explains how probate value works and how CGT is calculated for beneficiaries.
6. What If There Is No Income After Death?
If the Estate:
- Receives no rent,
- Has no Interest or Dividends,
- Does not sell assets,
- And only holds cash…
Then no Estate Return is required.
But the Executor should still:
- Notify HMRC
- Check the Final Return position
- Keep records
- Maintain evidence that the Estate had no taxable income
7. What Records Should Executors Keep?
Executors often feel overwhelmed with paperwork.
A simple checklist helps:
- Probate value of all assets
- Property valuations
- Tenancy agreements (if rented)
- Rental income received after death
- Expenses during administration
- Bank statements
- Dividends / interest statements
- Sale proceeds
- Selling costs
- Correspondence from HMRC
Executors must keep records for at least 5 years after the Estate is closed.
8. When Executors Need Professional Support
You should seek help if:
- There is rental income
- There are overseas assets
- You inherited with siblings
- There are Capital gains during probate
- HMRC request a Final Return or Estate Return
- There are both IHT and CGT considerations
- The Estate is large, or complex
- There is uncertainty around Probate value or allowable costs
Families often don’t realise how easily things can be missed — especially with rental income or asset sales.
This is where I step in as the Accountant. Families often need help with:
- Preparing the Final Tax Return
- Estate income calculation
- Dealing with Rental income during Probate
- Working out Capital Gains Tax
- Communicating with HMRC
- Advice for future ownership
- Ensuring no Tax obligations are missed
If you haven’t yet read it, my article on What To Do When Someone Dies explains the earlier practical steps before reaching the tax stage.
Final Word
Losing someone is difficult enough.
Understanding what HMRC expect should not add to the stress.
If you need help with the Final Return, the Estate Return, Rental during Probate, or HMRC’s reporting rules, you can contact me.
I can walk you through everything calmly and clearly so nothing is missed.