Having had the opportunity to check in Mellowes taxation of executors, it appears to be as I previously thought, interest on legacies is payable from net residuary income, so will be deducted on the tax certificate and the beneficiary of residue will not have to pay tax on the before payment of interest figure. However, as Paul says, the executors cannot treat the interest as a before tax deduction and it is paid gross.
Simon Northcott