Bereavement Tax Issues

Tax issues

There are three types of tax for which the estate of the person who has died may be liable. They are income tax, inheritance tax and capital gains tax (CGT).

Income tax

• The estate of the person who has died may be liable to income tax if the deceased received money from any of the following sources in the year prior to their death:
• Employment or self-employment
• Interest on savings
• Pensions – state, company and/or personal
• Share dividends
• Property rental
• Trust funds

Inheritance tax

If the total assets of the deceased are valued above a certain threshold then inheritance tax will be payable.

You can find the current Inheritance Tax threshold here.

Capital Gains Tax

The estate of the person who has died may be liable for Capital Gains Tax if they gave away, sold or transferred assets.

The forms you will need to complete in any of the above instances vary. Professional help is available to help you complete a tax return and to limit your exposure to tax.

Benefits you may be entitled to

If the person who has died is not your spouse or partner then be sure to alert the tax office if they were in receipt of any benefits or tax credits. This will avoid the need to pay back any overpayments out of the estate.

If you were receiving benefits when your spouse or civil partner died then there may be changes to those benefits. Contact your local tax office to ensure your payments are correct.

Other benefits

In addition to tax credits and 'standard' benefits there may be specific benefits available to you as a result of bereavement if you are a surviving spouse or civil partner.

These are:

• Bereavement Payment If your spouse or civil partner has died you may be able receive a single tax-free lump sum payment. Find out more here.
• Bereavement Allowance If your spouse or civil partner has died you may be entitled to a weekly bereavement allowance, payable for up to 52 weeks from the date of death. Find out more here.
• Widowed Parents Allowance If your spouse or civil partner has died and you have a child for whom you receive Child Benefit you may be entitled to Widowed Parents Allowance. See if you are eligible here.
• Guardian's Allowance If you are bringing up a child whose biological or adopted parents have died you may be entitled to Guardian's Allowance.

War Pension and Armed Forces Compensation Scheme

• If your spouse or civil partner died as a result of their service in HM Armed Forces, or during a time of war, you may be entitled to a tax free War Widow's or Widower's Pension.
• For those who served after 6 April 2005, the Armed Forces Compensation Scheme offers financial help. You can find out more here.
• For more information about general benefits you may be entitled to, see here.