Do executors need to file a tax return for an estate in Scotland?

This is the part of an executry that often catches families out, because nothing arrives to prompt you. Banks keep paying interest, a house may be let or sold, and shares keep paying dividends. HMRC expects the executor to spot the tax and report it, and an executor who gets it wrong can be personally responsible.

Three different taxes, three different periods

Inheritance tax is covered in our guide to inheritance tax in Scotland. This guide deals with the first and third periods.

The person's final tax return

The executor is responsible for the tax of the person who died, from 6 April up to the date of death, and for any earlier years that were never settled.

• If they were in Self Assessment, for example because they were self-employed, had rental income or had a large pension, the executor completes a tax return for the tax year of the death and any earlier years not yet filed.
• If they were taxed only through PAYE, HMRC normally works out the final position once it hears about the death and receives the last salary or pension figures. Tell Us Once, offered when you register the death, lets HMRC know.
• Refunds and tax owed. Many people are due a small refund for the year of death, because their personal allowance covers the whole year. Tax owed is a debt of the estate and is paid before the beneficiaries.

Income tax while the estate is being wound up

From the day after the death until everything has been paid out, the estate is taxed on the income it receives. HMRC calls this the administration period. Typical income includes bank and building society interest, rent from a let property, and dividends from shares.

• The £500 rule. From 6 April 2024, if the estate's income from all sources is £500 or less in a tax year, it does not need to be reported. The £500 cannot be carried from one year to the next, and if income goes over £500, all of it is taxable, not just the excess.
• No personal allowance. Estates do not get the allowances an individual gets. Income is taxed at 20%, and dividends received from 6 April 2026 at 10.75%.
• ISAs. Income and gains inside an ISA stay tax-free until the estate is closed, or for up to three years after the death.

When the executor pays income out to a beneficiary, the executor gives them a form R185, which shows the income and the tax already paid by the estate, so the beneficiary can include it in their own tax position.

Capital gains tax when the executor sells

The starting value for capital gains tax is the value at the date of death, the same figure used in the Confirmation inventory. If the executor later sells for more than that, after deducting selling costs, there may be capital gains tax to pay. That is one reason an accurate date of death valuation matters; see our guide on valuing an estate for Confirmation.

• Annual exempt amount. Executors get the same £3,000 tax-free amount as an individual, for the tax year of the death and the two tax years after it.
• Rate. Gains made by executors are taxed at 24%.
• The 60-day deadline. If there is tax on the sale of a house or flat, it usually has to be reported to HMRC, and the tax paid, within 60 days of completion.
• Transferring instead of selling. There is no capital gains tax when the executor transfers an asset to a beneficiary. If the beneficiary sells it later, the gain is theirs, and they can use their own allowance and rate.
• A beneficiary's home. Relief can sometimes apply where the house was the main home, before and after the death, of the beneficiaries who inherit most of it.

Selling at a loss can help too. If shares are sold for less than their date of death value within 12 months, or land and buildings within four years, the executor may be able to claim the lower figure for inheritance tax. Our guide on selling an inherited house covers the choices.

Simple estates: reporting by letter

Most estates never need a formal tax return. HMRC lets the executor report the tax by letter at the end of the administration, known as an informal arrangement, if all of these apply:

• the estate was worth less than £2.5 million at the date of death;
• the total income tax and capital gains tax due is less than £10,000;
• no more than £500,000 of assets were sold in any single tax year.

The letter gives the executor's details, the name, address, National Insurance number and tax reference of the person who died, and a year by year breakdown of the income and gains. HMRC then says how to pay.

Complex estates: registering and filing returns

If the estate does not qualify as simple, the executor must register it online with HMRC and file a Trust and Estate Tax Return, form SA900, for each tax year.

Each deadline falls after the end of the tax year the return covers. For example, for the tax year ending 5 April 2026, the estate must be registered by 5 October 2026.

Trusts in the will

Some wills set up a trust, for example a liferent of the house for a surviving spouse, or money held for children until they reach a certain age. A trust created by a will does not need to go on HMRC's Trust Registration Service for two years after the death. If it is still running after that, it usually needs to be registered, and a trust has its own tax returns. We check this as part of the executry.

How long the estate stays open for tax

The administration period ends when the estate has been fully paid out. The quicker the estate is wound up, the fewer tax years it spans. Our guide on how long an executor has to settle an estate explains the usual timescales, and our executor's checklist shows where tax fits in.

How we can help

We deal with the tax side of the executry as part of our estate administration service: the final tax return, income and gains during the administration, the informal letter or full estate returns, and the 60-day property reporting. If you are handling the estate yourself, our advice for executors can cover just the tax. Talk to our executry solicitors in Glasgow, Paisley, Renfrew, Barrhead, Hamilton, East Kilbride, Motherwell or Dumfries. Your first appointment is free.

This guide is general information about Scots law, correct at the date shown. It is not legal advice for your circumstances.