There can be a mountain of paperwork to deal with after a bereavement, and everyday matters like dealing with banks, council departments and utility companies can become overwhelming. One area which needs attention in the majority of bereavements is tax. It is also the area most likely to be overlooked or relegated to the bottom of the list of things to do.
The tax affairs of the deceased have to be reconciled to the date of death, as tax may be overpaid or underpaid. And this is where it’s all changing, From October 2014 form R27 (Reclaiming tax or paying tax when someone dies) is being replaced by personalised letters and an automatically produced tax calculation (P800). For those in the self assessment (SA) system the process has been improved to allow ‘in year’ returns, speeding up the whole process.
The executor, personal representative (PR) or relative informs HMRC of a death - either through the ‘Tell us Once’ service or personally.
It is not unusual to see errors in calculations and it really is important to check them over carefully.
In most cases it is important to review the survivor’s tax situation as this usually changes. Form 161(W) is used to notify HMRC of any changes to their income. This form is mentioned in the new letters but you have to ask for a copy. It is not unusual for a non-taxpayer to become a taxpayer because they have inherited income. The form asks for information on income after the date of death and is a snap shot in time so it is best completed once all the changes have settled down. HMRC then review the tax codes or decide if a self assessment return is required.
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