News and insights from the Verallo team
Changes to £500 allowance for estates and trusts
From the 2024/25 tax year, the £500 tax-free allowance for low-income estates and trusts has changed, and it’s important to understand how this affects reporting.
We’ve summarised the key takeaways:
Previous rules (up to 2023/24)
-
The £500 allowance applied only to savings income.
-
Estates with total income under £500 were not taxed on that income.
New rules (2024/25 onwards)
-
The £500 allowance now applies to all types of income, not just savings.
-
Each tax year that an estate is in administration gets its own £500 allowance.
-
If income exceeds £500 in any year, all of the income is taxable.
-
Unused allowance cannot be carried forward to future years.
-
The allowance is shared with any trusts the deceased had established, so it’s essential to report the number of trusts on the SA900 tax return.
Trusts and reporting
-
The allowance is shared with any trusts established by the deceased, with some exceptions.
-
To prevent mistakes, it’s important to accurately record the number of trusts on the SA900 tax return (box 9B.1).
HMRC warning
-
HMRC has seen errors in simple estates that have used the informal “letter to HMRC” method instead of completing an SA900.
From 2024/25, the £500 allowance is more strictly applied; it counts all income, resets each year, and must be reported correctly when trusts are involved.
For support with reporting or guidance on the new rules, speak with our experts today.