Income from a trust or from the estate of a deceased person
Other tax issues
If you receive some income from either a trust or from the estate of a deceased person, you may have further tax to pay on the income or you may be able to claim a tax refund. In some cases you are taxable on trust income even if you do not receive it, but you can follow the guidance below as if you had received it.
Our guidance here is only relevant to trusts that are not settlor interested (which basically means that the person who put the money into the trust can still get a benefit from it).
I have received trust income. What do I need to do?
We use the word trust here but sometimes you will hear the word settlement instead.
When the trustees pay out any funds to you, they should tell you whether it is income or capital. When trust income is taxable on you, the trustees should provide you with a form R185 (trust income). This form shows you the income paid to you and the tax deducted from it. The form also gives you instructions on how to complete a tax return including this income.
If you have not received a form R185 but have received a payment from a trust, check with the trustees whether any of the payment is income and when you will be receiving the R185.
Discretionary trust income
If your payment is from a discretionary trust (the type of trust income is shown on the form R185), it will be treated as having had tax deducted from it at a rate of tax of 45% (2022/23) before it is paid to you.
Regardless of the type of income actually received by the trust, you are treated as receiving one type of income – trust income. If you complete a tax return each year, you need to include the income on the Trusts etc pages. For more information, see below.
If you pay tax at a lower rate than the tax deducted from your trust income, you will be able to get a tax refund. You can read how to claim your tax refund in our tax basics section.
Non-discretionary trust income
If the income you have received is not from a discretionary trust, your income may have been taxed at a variety of tax rates, depending on the type of income received by the trust.
This means you need to put the different types of income into separate boxes on any tax return, following the instructions on the R185 form.
This also means that you may be able to claim a tax refund if you have not used your personal savings or dividend allowance, for example. This is because any savings and dividend income you receive from the trust will have had tax paid on it by the trust, but in your hands, no tax might be due on it.
Be aware, though, that the maximum rate of tax deducted from this type of income is UK basic rate (20% in 2022/23). This might mean that you have to pay extra tax on the income if you are a higher rate taxpayer or above.
I have received income from the estate of a deceased person. What do I need to do?
Your income from the estate will be taxed in exactly the same way as the trust income that is not from a discretionary trust, as described above. However, how you report the income is different.
The administrators of the estate should provide you with form R185 (estate income). If you have not received a form R185 but have received a payment from an estate, check with the executors or personal representatives administering the estate whether any of the payment is income and when you will be receiving the R185.
Putting trust or estate income on a tax return
As noted in the information above, you have to put discretionary trust income and estate income on the Trusts etc pages of the tax return.
You can use the Trusts etc pages if you fill in a paper tax return. This usually needs to be submitted by 31 October after the end of the tax year to which it relates. This means 31 October 2023 for the tax year ending 5 April 2023.
If you fill in your tax returns electronically, you have a longer filing date. This is 31 January 2024 for the tax year ending 5 April 2023. However, you cannot use HMRC’s own online filing system to send them a tax return including trust and estate income which would go on the Trusts etc pages of the paper return. You can file electronically, but you have to use third-party software and make sure the version you use supports filing of the trust pages.
Where can I get more information?
You can read more information about trusts on GOV.UK.
There is more information on bereavement generally in our bereavement section.
Scottish taxpayers should also read the information in our tax basics section.