How to Claim Back Tax on Savings After a Spouse Dies

When a spouse or civil partner dies, the tax treatment of their savings does not simply end on the date of death. There are two distinct contexts in which tax on savings may be reclaimed: tax that was deducted from the deceased's own savings interest during their lifetime (up to the date of death), and tax on savings interest earned by the estate during the administration period that is later distributed to beneficiaries. Each context involves different rules, different forms, and different reclaim mechanisms. Understanding how these two streams of tax operate — and who is entitled to reclaim what — is essential for personal representatives and surviving spouses or civil partners navigating the process.

This article explains how the system works across the United Kingdom. It covers the tax position of the deceased, the tax position of the estate, the tax position of beneficiaries receiving estate income, and the separate rules governing ISA savings inherited by a surviving spouse or civil partner. It does not provide financial advice.

Tax on savings after a spouse dies can potentially be reclaimed in two separate ways.

First, the deceased's own tax affairs for the tax year in which they died (and any earlier outstanding years) are finalised by HMRC. If the deceased overpaid tax on savings interest — for example, because their full Personal Allowance of £12,570 was not used — the estate may be due a refund. HMRC reviews the deceased's position and either issues a P800 tax calculation or requests a Self Assessment return from the personal representatives.

Second, during the period in which the estate is being administered, any savings interest earned on estate funds is treated as estate income. The estate pays tax on this at the basic rate of 20%. When that income is distributed to beneficiaries, those beneficiaries may be able to reclaim some or all of the tax paid by the estate, depending on their own tax position and available allowances — including the Personal Savings Allowance. A beneficiary who is a basic rate taxpayer has a Personal Savings Allowance of £1,000, while a higher rate taxpayer has £500. An additional rate taxpayer has no Personal Savings Allowance.

From 6 April 2024 onwards, where total estate income is £500 or less in a tax year, no tax is due on that income and there is no reporting obligation for the estate. If this de minimis applies, any income distributed to beneficiaries from that amount is also not taxable on the beneficiaries.

Separately, the surviving spouse or civil partner may be entitled to an Additional Permitted Subscription (APS) for ISAs, which preserves the tax-efficient status of the deceased's ISA savings without affecting any of the above.

The tax system treats the deceased's pre-death income and the estate's post-death income as two entirely separate tax positions. The dividing line is the date of death.

The deceased's own tax position

Interest credited to the deceased's bank or building society accounts before the date of death is treated as the deceased's own income. This income forms part of the deceased's final tax calculation for the tax year in which they died.

The full Personal Allowance of £12,570 is available for the tax year of death, regardless of when in the year the death occurred. If the deceased's total income for that year was below the Personal Allowance, or if tax was deducted via PAYE on employment or pension income that exceeded what was ultimately due, the estate may be owed a refund.

HMRC is notified of the death through the Tell Us Once service (where available in the local area) or by contacting the HMRC Bereavement Helpline directly. HMRC then reviews the deceased's tax position and aims to contact the personal representatives within 30 days of notification, although this may take longer if the death occurred early in the tax year — HMRC does not receive bank interest data until 30 June following the end of the relevant tax year.

Since October 2014, HMRC has used automated processes rather than the former R27 form. HMRC issues letters designated P1000(SA), P1003(SA), or P1004(SA) as appropriate, and will determine whether a Self Assessment return is needed or whether affairs can be finalised without further action. Where a Self Assessment return is required for the deceased, it must be submitted as a paper return — personal representatives cannot file online for a deceased person.

The estate's tax position during administration

Interest credited to the deceased's accounts after the date of death is treated as estate income. This applies to all savings interest arising during the administration period, which runs from the date of death until the estate is fully wound up.

Estates do not benefit from the Personal Savings Allowance or the Dividend Allowance. The estate pays tax at the basic rate on savings income, which is 20%. For dividends, the rate is 8.75%, and for rental profits, 20%. No higher rates apply to estates regardless of the level of income.

The taxation of estate income is governed by Part 5, Chapter 6 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), specifically sections 649 to 682A.

How estate income reaches beneficiaries

When personal representatives distribute estate income to beneficiaries, they provide each beneficiary with form R185 (Estate Income). This form shows the amount of income paid to the beneficiary and the tax deemed to have been paid by the personal representatives. The beneficiary then uses these figures for their own tax return or to make a repayment claim.

Each beneficiary is treated as receiving only their share of the estate income. Whether they can reclaim any of the tax depends on their own total income and available allowances. A beneficiary whose income falls within their Personal Allowance, or whose savings income falls within their Personal Savings Allowance, may be entitled to a full or partial refund of the tax shown on the R185.

ISAs and the surviving spouse or civil partner

ISAs held by the deceased become "continuing ISAs" after death. They retain their tax-free status until the earliest of three events: completion of estate administration, closure of the ISA, or three years after the date of death. During this period, income and growth within the ISA remain tax-free.

The surviving spouse or civil partner is entitled to an Additional Permitted Subscription (APS) — an extra ISA allowance equal to the value of the deceased's ISA holdings at the date of death. This is in addition to the normal annual ISA subscription limit of £20,000 for the 2025/26 tax year. The APS is available regardless of whether the surviving spouse or civil partner actually inherits the ISA assets.

The £500 estate income de minimis (from 2024/25 onwards)

From 6 April 2024, if the estate's total income from all sources is £500 or less in a tax year, there is no requirement to report the estate's income to HMRC, and no tax is due. This £500 threshold applies per tax year of the administration period but cannot be carried forward — unused amounts do not roll over to subsequent years.

Critically, if income exceeds £500, the full amount becomes reportable and taxable. The £500 is not a deduction or allowance; it is a threshold below which no reporting or tax liability arises. If the estate's income is within this de minimis, any distributions of that income to beneficiaries are also not treated as taxable estate income for the beneficiaries, under sections 649 and 680(1A) of ITTOIA 2005. In these circumstances, no R185 form is required.

For tax years before 2024/25, a different historical threshold applied: where the estate's only income was bank account interest and the total tax due was £100 or less, there was no requirement to report. This earlier threshold no longer applies from the 2024/25 tax year onwards.

"Simple" estate criteria for informal reporting

Where the estate does need to be reported but meets certain criteria, it may qualify for informal reporting by letter rather than a formal Trust and Estate Tax Return (SA900). All three of the following must apply: the estate was valued at less than £2.5 million at the date of death, the total Income Tax and Capital Gains Tax due is less than £10,000, and no more than £500,000 worth of assets were sold in any single tax year. If any one of these is exceeded, formal tax returns are required.

Simple estates are reported informally by letter to HMRC Bereavement Services (BX9 2BS), with a year-by-year breakdown of income. This is done at the end of the administration period. Complex estates require the Trust and Estate Tax Return (SA900), which must be submitted by 31 January following the end of the relevant tax year.

Tax rates on estate income

The estate pays tax at basic rates only, regardless of the total amount of income. Savings income is taxed at 20%, dividend income at 8.75%, and rental income at 20%.

Personal Savings Allowance for beneficiaries

When estate income deemed to be savings income under section 680B of ITTOIA 2005 is distributed to a beneficiary, that beneficiary's Personal Savings Allowance may apply to their share. The allowance for the 2025/26 tax year is £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and £0 for additional rate taxpayers. ISA interest does not count towards this allowance.

The starting rate for savings

Individuals whose non-savings income is below the Personal Allowance or within the starting rate band may benefit from the £5,000 starting rate for savings, which is taxed at 0%. This applies to beneficiaries as individuals, not to estates.

Time limits for reclaiming tax

The general rule is that a refund cannot be claimed more than four years after the end of the relevant tax year. For example, a claim relating to the 2024/25 tax year must be made by 5 April 2029. This applies to R40 claims and other repayment claims. A separate application is required for each tax year.

APS time limits

For cash subscriptions using the APS allowance, the deadline is three years from the date of death or 180 days after completion of estate administration, whichever is later. For in specie transfers (transferring the actual investments rather than cash), the deadline is 180 days from the date on which beneficial ownership passes to the surviving spouse or civil partner. In specie transfers are only available with the deceased's ISA provider; if the surviving spouse or civil partner uses a different provider, the subscription must be made in cash.

Pre-death interest versus post-death interest

The distinction between interest credited before the date of death and interest credited after the date of death determines whether the income belongs to the deceased personally or to the estate. These are taxed under entirely different frameworks. Interest credited before death forms part of the deceased's own final tax computation. Interest credited after death is estate income, subject to the estate's own tax rules.

Tax deducted at source from bank interest

Tax deducted at source from bank or building society interest is not normally available for repayment to personal representatives (as confirmed by HMRC manual TSEM7262). However, beneficiaries receiving their share of estate income may be able to reclaim tax depending on their own circumstances — this is a separate mechanism that operates through form R185 and the beneficiary's own tax position.

Estates cannot use personal allowances

The Personal Savings Allowance, the Dividend Allowance, and the Personal Allowance itself are not available to personal representatives to set against post-death income of the estate. These allowances belong to individuals, not to estates. However, beneficiaries can use their own allowances when they receive distributions of estate income.

The £500 de minimis is not a deduction

If estate income exceeds £500 in a tax year, the full amount is reportable and taxable — not just the excess above £500. The threshold operates as an all-or-nothing exemption.

The APS is not dependent on inheritance

The surviving spouse or civil partner's entitlement to the Additional Permitted Subscription does not depend on whether they actually inherit the ISA assets. The APS is equal to the value of the deceased's ISA holdings at death and is available to the surviving spouse or civil partner in all cases, provided the eligibility conditions are met.

Filing for the deceased must be on paper

Where a Self Assessment return is required for the deceased, personal representatives must submit a paper return. Online filing is not available for deceased persons.

Scotland and income tax rates

Scottish taxpayers have different income tax rates and bands for non-savings, non-dividend income. For the 2025/26 tax year, the Scottish rates are: Starter rate 19% (up to £2,827), Basic rate 20% (£2,828 to £14,921), Intermediate rate 21% (£14,922 to £31,092), Higher rate 42% (£31,093 to £62,430), Advanced rate 45% (£62,431 to £125,140), and Top rate 48% (over £125,141). However, savings and dividend tax rates remain UK-wide and are not affected by Scottish devolution. This means the estate's tax on savings income is 20% regardless of whether the deceased or any beneficiary is a Scottish taxpayer, and the beneficiary's ability to reclaim tax on savings income is governed by the UK-wide savings rates and allowances.

Married Couple's Allowance and Blind Person's Allowance

Where one spouse was born before 6 April 1935, the Married Couple's Allowance continues to the end of the tax year of death, and any unused portion may be transferable to the surviving spouse. The Blind Person's Allowance can also be transferred to the surviving spouse for the remainder of the tax year. For couples where both were born after 5 April 1935, the Marriage Allowance (the transferable tax allowance of up to 10% of the Personal Allowance) also continues to the end of the tax year of death.

Continuing ISAs and the three-year limit

The deceased's ISAs retain their tax-free status as "continuing ISAs," but this protection is time-limited. It ends at the earliest of: completion of the estate administration, closure of the ISA account, or three years after the date of death. After this point, any funds remaining in the account lose their ISA tax-free status.

APS eligibility requirements

The APS is available only to a surviving spouse or civil partner who was married to or in a civil partnership with the deceased at the date of death, and who was living together with the deceased (not separated under a court order or deed of separation). The deceased must have died on or after 3 December 2014. The APS does not apply to Junior ISAs or Child Trust Funds, and it is not available to non-spouse beneficiaries.

Personal Allowance tapering

The Personal Allowance of £12,570 is reduced by £1 for every £2 of income above £100,000, reaching zero at £125,140. This tapering applies to the deceased's final tax year computation and to any beneficiary's own tax position. Where the deceased had high income in their final tax year, the available Personal Allowance may be lower than the standard amount.

Inheritance Tax nil-rate band

While not directly related to reclaiming Income Tax on savings, it is relevant context that the Inheritance Tax nil-rate band is £325,000, frozen at this level until 5 April 2031. The residence nil-rate band is £175,000, also frozen until 2031. The residence nil-rate band begins to taper for estates valued at over £2 million. These thresholds relate to the Inheritance Tax position of the estate, not to the Income Tax reclaim mechanisms described in this article.

The de minimis and beneficiaries — a distinct treatment from trusts

Where estate income falls within the £500 de minimis and no tax is payable by the estate, any income distributed to beneficiaries from that amount is also not taxable on the beneficiaries. This is established by sections 649 and 680(1A) of ITTOIA 2005. This treatment is different from trusts, where distributions may remain taxable on beneficiaries regardless of tax paid by the trustees.

When a spouse or civil partner dies and leaves savings, the practical tax consequences unfold across several stages.

In the immediate period after death, HMRC is notified — ideally through the Tell Us Once service, which alerts multiple government organisations simultaneously. HMRC then reviews the deceased's tax position. If the deceased overpaid tax in the tax year of death — because their full Personal Allowance was not used, for instance — HMRC will either issue a P800 calculation showing tax is owed back to the estate or request a Self Assessment return from the personal representatives to finalise the position.

During the administration period, any savings interest that accumulates on estate funds is taxed at 20% as estate income. If the total estate income in a given tax year is £500 or less (from 2024/25 onwards), no tax is due and there is nothing to report. If it exceeds £500, the personal representatives are responsible for reporting the income to HMRC — either informally by letter for simple estates, or via a Trust and Estate Tax Return for complex estates.

When estate income is distributed to beneficiaries, the personal representatives issue form R185 (Estate Income) to each beneficiary, showing their share of the income and the tax deemed paid. Beneficiaries then assess whether they can reclaim some or all of that tax. A beneficiary with low overall income, or one whose savings income falls within their Personal Savings Allowance, may be entitled to a refund. The claim is made using form R40 (for those not in Self Assessment) or through the beneficiary's own Self Assessment return. Claims must be submitted for each tax year separately, and the general time limit is four years after the end of the relevant tax year.

For the surviving spouse or civil partner specifically, the Additional Permitted Subscription provides a way to subscribe additional funds into an ISA up to the value of the deceased's ISA holdings at death. This is a separate entitlement from any Income Tax reclaim and is subject to its own time limits — broadly, three years from the date of death or 180 days after completion of estate administration for cash subscriptions, whichever is later.

Is the Personal Savings Allowance available to the estate?

No. The Personal Savings Allowance is not available to personal representatives or to the estate. It applies only to individual taxpayers. However, when estate income is distributed to beneficiaries, those beneficiaries may use their own Personal Savings Allowance when assessing whether they are owed a tax refund.

What form do I use to claim a refund on estate savings income as a beneficiary?

Beneficiaries who are not in Self Assessment can use form R40 to claim a refund of tax on savings and investments, provided their gross income from savings and investments is £10,000 or less, gross income from land and property is £10,000 or less, and net income from land and property is £2,500 or less. The form must be submitted by post to Pay As You Earn, HM Revenue and Customs, BX9 1AS. A separate form is required for each tax year. Claims can be made for the current tax year and the previous four tax years.

What is the APS and who is eligible?

The Additional Permitted Subscription (APS) allows a surviving spouse or civil partner to subscribe an additional amount into an ISA equal to the value of the deceased's ISA holdings at the date of death. It was introduced under the Individual Savings Account (Amendment) Regulations 2015 and applies to deaths on or after 3 December 2014. The surviving spouse or civil partner must have been married to or in a civil partnership with the deceased at the date of death and living together (not separated under a court order or deed of separation). The APS is in addition to the normal annual ISA subscription limit of £20,000 for the 2025/26 tax year and can be used with the deceased's ISA provider or a different provider.

Can the APS be used with a different ISA provider from the deceased's?

Yes, but with a restriction. If using a different provider, the subscription must be in cash. In specie transfers — where the actual investments are transferred rather than sold and reinvested — are only available with the deceased's original ISA provider.

What happens if estate income is exactly £500 or less?

From 6 April 2024, if total estate income from all sources is £500 or less in a tax year, no tax is due, there is no reporting requirement, and any distributions from that income to beneficiaries are also not taxable on the beneficiaries. No R185 form is needed. ISA income continues to be exempt separately and does not count towards this threshold.

How long does a refund take to process?

HMRC does not publish a definitive processing timeframe for R40 repayment claims relating to estates. Published guidance states that HMRC will contact the claimant once the claim has been processed.

Does the full Personal Allowance apply if the death occurs partway through the tax year?

Yes. The full Personal Allowance of £12,570 is available for the tax year of death regardless of when in the year the death occurred. If the deceased's income for that tax year was below the allowance, tax paid via PAYE may be reclaimable by the estate.

What is the difference between the estate's tax position and the beneficiary's tax position?

The estate is a separate taxable entity during the administration period. It pays tax at basic rates (20% on savings income) and cannot use personal allowances. When income is distributed to beneficiaries, each beneficiary is treated as receiving their share and can apply their own Personal Allowance, Personal Savings Allowance, and other reliefs. This means tax paid by the estate at 20% may be partially or fully reclaimable by a beneficiary whose own tax position results in a lower effective rate.

Can personal representatives file the deceased's Self Assessment return online?

No. Where a Self Assessment return is required for the deceased, it must be submitted as a paper return. Online filing is not available to personal representatives for a deceased person's tax affairs.

Is the APS available if we were separated but not divorced?

The APS requires that the surviving spouse or civil partner was living together with the deceased at the date of death. If the couple were separated under a court order or a deed of separation, the APS is not available, even if the marriage or civil partnership had not been formally dissolved.

• The deceased's full Personal Allowance applies for the tax year of death.
• Estates pay 20% tax on savings income and usually cannot use personal allowances (except the new £500 de minimis).
• Beneficiaries can reclaim tax paid by the estate if their own Personal Savings Allowance or Personal Allowance covers it.
• The Additional Permitted Subscription (APS) allows surviving spouses to inherit the ISA allowance value, separate from estate income rules.
• Claims generally have a 4-year time limit.

Related: Savings Interest and Higher-Rate Tax.