Income and Capital Gains Tax in Respect of the Period of the Administration of an Estate Unit 5 Conduct Issues

Introduction

During the administration of an estate, the personal representatives ('PRs') are not only collecting assets and paying **inheritance tax** (Chapters 9 and 10): they are also **taxpayers in their own right**. Income received by the estate after death is subject to **income tax** in the hands of the PRs; gains realised on the disposal of estate assets are subject to **capital gains tax (CGT)**. Both charges run alongside the IHT imposed by reason of death. This chapter explains how each operates, how the **administration period** interfaces with the **beneficiary's** own tax position, and how to handle the **stamp-duty** and **SDLT** issues that arise on assent.

Assessment focus

The FLK2 syllabus expressly requires candidates to **identify and apply** the rules on income tax and CGT during the administration period. You must know: the **death-date uplift** for CGT under **s.62 TCGA 1992**; the PRs' **single annual exempt amount** and its restriction to the year of death and the following two tax years; the **PR CGT rate** (a single flat **24%** on all assets from 30 October 2024); the **flat income-tax rates** of **8.75%** (dividends) and **20%** (all other income) on estate income; and the **beneficiary-level R185 credit**. Questions are single best answer questions set in realistic scenarios requiring **application** of the 2026 rates, not mere recall.

Study tips

1) Memorise the **2026 figures**: PR income tax **8.75% / 20%**; PR CGT **24%** (all assets from 30 October 2024); PR annual exempt amount **£3,000** (year of death **plus 2**); beneficiary personal allowance **£12,570** and dividend allowance **£500**. 2) PRs have **NO** personal allowance, NO savings allowance, NO dividend allowance — a frequent trap. 3) The **s.62 TCGA 1992 uplift**: probate value becomes base cost; **no deemed disposal** on death. 4) The **AEA window** is strictly the year of death + **2** tax years; nothing thereafter. 5) **s.142 IHTA 1984** variations: **writing**, within **2 years**, **no consideration**, **statutory election** — and the two-year deadline is **absolute**.