I am after some help please! My first chargeable event certificate has landed that needs action!
I am dealing with an estate where I have received a chargeable event certificate from AVIVA where the gain is £10,850, 23 years for top slicing relief, and £2,170 amount treated as paid. The deceased is a basic rate tax payer but the gain added to his existing income for a whole tax year would take him into the higher rate tax bracket.
The deceased died in June 2025, so I am trying to work out if the gain does indeed take him into the higher rate tax bracket. My question is, are the figures worked out on what the deceased would have expected to receive in the full year 2025 to 2026 then you add the chargeable gain, or is the chargeable gain only added onto the income he received from 6th April 2025 to the date of death (June 2025)? If it is the latter then I do not need to consider top slicing and I am confident no tax is payable.
I am also aware, that as the gain is over £10,000, HMRC would expect me to complete a tax return for the estate to report the gain. If there is no income tax to pay, do you think I could get away without completing a tax return and send a letter to HMRC instead with a copy of the certificate and a breakdown and payment for any other income (which is very little)?
Finally, do you deal with chargeable event certificates, top slicing, and tax returns yourself, or do you feel it is better to instruct an accountant subject to clients approval?
The figures are worked out on the actual income for the period (i.e. to date of death), rather than for a theoretical full year, so you should be okay re additional tax.
As the gain is over £10k, then you do meet the self-assessment criteria, so HMRC will expect you to complete a return for the period to date of death. If a return hasn’t been issued, you could try sending a letter and see what they say, but given HMRC’s postal turnaround times, it is likely to be quicker & easier to simply do a tax return.
I note that you haven’t confirmed the chargeable event type i.e. was it a death event (as the deceased was the sole life or last remaining life assured) or surrender event (because the LPR cashed in the bond)? I thought I should point this out as they are treated differently.
Both scenarios are covered in IPTM3240. If it was a surrender event the gain is not assessed against the deceased policyholder. Instead, it will be assessed as follows:
2. Gains on which tax is treated as paid
These gains are not taxable income for the estate. The personal representatives have no further tax to pay and should not show the gain on SA900 or SA904.
For the purposes of determining the beneficiary’s income the gains form part of the aggregate income of the estate by virtue of s664(2)(e) ITTOIA05. The amount is grossed and a tax credit applied at the basic rate. It is not treated by s680B ITTOIA05 as savings income for the beneficiary.
The personal representatives can use box 19 on R185 (Estate Income) to give the beneficiary details of the income received and tax already accounted for.
There will be no further tax payable by the beneficiary unless they are a higher or additional rate taxpayer. A beneficiary in Self-Assessment should include this estate income at box 19 of SA107.
The tax credit is not repayable if they are a non-taxpayer.