The old rules were in sections 695 and 696 Taxes Act 1988. For life interests under a will, interim payments of income during the administration period were initially taxed as income in the year they were paid, but on
completion of the administration of the estate, all the income of the administration period was treated as having accrued evenly over that period, and the assessments for each year were then revised accordingly. This was a cumbersome process and unsuited to
For absolute interests in residue, interim payments were treated as primarily distributions of the estate income and assessed accordingly on an interim basis. On completion of the administration period the actual income
of the residuary estate for each tax year was then assessed on the beneficiary for the years concerned and interim assessments were revised.There were rules to ensure that no more than the amount of estate income was actually assessed.
For estates where the administration is completed after 6 April 1995, the alteration of interim assessments no longer applies and any final amount of income payable to an income beneficiary is assessed for the year in
which the administration ends. Similarly for absolute interests the balance of income payable on completion of the administration is assessed as income of the year in which the administration ends.