Bank and building society interest - Deceased
- How is interest taxed if a person with a bank or building society account dies?
- What happens if the deceased saver was not a taxpayer and had completed form R85?
- How is interest taxed if a person with a joint account dies?
How is interest taxed if a person with a bank or building society account dies?
Interest credited to someone’s account after the date of death is the income of the deceased person’s estate, not the deceased person. And tax must be taken off this interest.
This tax cannot normally be repaid. The only time it can be repaid is if the beneficiary of the estate is not a taxpayer. In these circumstances, if the interest is passed on to the beneficiary it may be treated as made after deduction of tax at the lower rate of 20%.
The amount of tax the beneficiary can claim will depend on their total taxable income and the amount of their allowances. The beneficiary should include the income on their self-assessment tax return if they complete one or they can complete form R40 (PDF 97K) if they do not pay tax. If they complete form R40 they should return it to
Leicester & Northants Area (Claims) Office
Saxon House
Causeway Lane
Leicester
LE1 4AA
The telephone number for Leicester & Northants Area (Claims) Office is 0845 366 7850.
What happens if the deceased saver was not a taxpayer and had completed a form R85?
If interest was being paid without tax taken off the bank or building society will cancel the R85 when they are notified of the death. Any interest paid or credited after the registration will have tax taken off. This interest cannot be apportioned to and from the date of death.
See an example of how interest paid to a deceased saver is taxed.
How is interest taxed if a person with a joint account dies?
This depends on the type of joint account.
The most common sort of joint account is where the parties to the account don't each own a particular share of the account; they jointly own all the monies in the account. Where one party to the account dies, his or her share passes automatically to the survivor and any interest paid after the date of death is the income of the survivor.
See an example of how interest is paid on a joint account, when one of the savers has died.
