Estates and the nil rate dividend band and gross interest

Two changes, effective from 6 April 2016 will result in more estates having to settle tax liabilities arising during the period of administration. Prior to 6 April 2016 most estates would only have had to worry about settling income tax in a few cases.

Now that virtually all interest is received gross (from 6 April 2017 interest distributions from OEICs and unit trusts will also start paying gross) it will be necessary to account for the basis rate (20%) tax liability due on the interest unless the only source of income is savings interest and the tax liability is below £100.

The good news is that if the total tax payable is likely to be less than £10,000 the tax liability can be assessed and paid informally.

This includes the 7.5% on dividends (estates do not get a £5,000 exempt band) that estates will now have to pay as there is no notional tax credit with dividends.