What Happens to Tax Debt After Death?

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Sorting out tax debt after someone passes away can seem a hard task. This article is here to help you understand what happens to such debt and make the steps you need to take clearer.

Lots of people worry about what will happen if they can’t pay their council tax. They fear legal action might be taken against them. If you have these worries, you are not alone. Over 170,000 people come to our website each month looking for advice on how to deal with debt.

In this article, you will learn about:

The steps to take if a person owing tax debt passes away.
How HMRC handles tax debt after death.
What happens to joint debts after someone dies.
How to check for life insurance that could cover the debt.
What to do if there isn’t enough money left to cover the debt.

The average council tax debt among those seeking support from Citizens Advice has remained stable at £1,100 over the last year.₁

Our aim is to provide help in a way that is easy to understand. We know the stress that tax debt can cause and are here to offer guidance. Together, we can work through these tough times.

What will happen to it if you die?

HM Revenue and Customs collects income tax and national insurance from workers in the UK. In some situations, people can get into debt with HMRC, especially those not on the PAYE scheme, i.e. people who are self-employed or run a limited company (not exclusively).

Outstanding tax debts to HMRC are also paid back within the deceased’s estate. For example, if the deceased owes £2,000 in tax to HMRC when they died and leave £10,000 in savings behind, £2,000 will be paid to HMRC and the remaining £8,000 will be paid as per the wishes of the deceased in their will.

Because the value of an estate is reported to HMRC for inheritance tax purposes, dealing with the deceased’s income tax debt during probate is not as difficult as you may imagine.

Contact them for tax liability support

HMRC run specialised helplines to help executors of wills to make sure tax debts are paid back correctly. If you need to contact HMRC, we have listed the key numbers here:

You can call the HMRC Bereavement line on 0300 200 3300. This number should be used to discuss individual debts relating to income tax.

You might need to call the HMRC deceased estate helpline on 0300 123 1072 to discuss any matters relating to income tax or Capital Gains Tax (CGT).

Other legal services and free debt charities are available to help.

What If there’s not enough money left behind?

If the amount of debt owed is more valuable than the amount of money and assets left behind by the deceased, their estate becomes known as an insolvent estate.

For example, if someone owed debts to government departments like HMRC and multiple creditors, and the total value of these debts is greater than the wealth left behind, they have an insolvent estate.

Insolvent estates are tricky and dealing with them is best done with professional help. HMRC and creditors will be repaid from what is available in a priority order.

Tax debt is one of the first to be paid back. Getting the priority order wrong can have consequences and make the PR (equivalent to executor) owe the money instead.

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What happens to council debts if someone dies?

Council debts are a little different in England and Wales. If someone dies with a council debt and they lived alone, the debt will be paid back through their estate. However, if the deceased was living with someone in the property during the time the debt accumulated, that person will also be responsible for paying back the debt because they benefited from a share of the property.

The other person – possibly a de facto partner, surviving spouse or civil partner – will have to personally pay back this debt even if their name was not on the council tax account during the relevant period. As they lived in the property during the time, the debt must be paid by them too.

The deceased person’s share of this debt could be paid back from their estate, but if the required funds to pay it off are not left behind, the debt passes to the other property occupier.

The same person will be left to pay the future council tax bills if they are now the sole occupier of the property, but they can claim a reduction of 25%.

The same rules apply to water bills. They have to pay the water bill even if they were not on the water bill, as long as they lived in the property where the water was supplied.

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Request them to be written off

Executors of a will in England, Wales, Scotland and Northern Ireland can ask for council debts to be written off if the deceased was in arrears. Local authorities have the power to decide and wipe these debts, but there is no guarantee that they will do so.

If you are now liable for this type of debt even though you were not named on the account (as explained above) you might want to ask for the debt to be wiped. Or at the very least, ask for an affordable repayment structure.

You could argue that the person who dies did not leave behind enough money or valuable assets to help you repay a larger bill, and you need time. Most local authorities will be sympathetic and negotiate a repayment plan if needed.

Can council tax debts become statute-barred?

Yes, council tax debts can become statute-barred.

If it has been 6 years – or 5 years in Scotland – since you last paid your council tax debts and you have not written to your creditor about your debt during this time, it is statute-barred.

This means that the debt is not enforceable. It still technically exists, and you still technically owe the money, but there is no legal way for you to be forced to pay or for the debt to be enforced.

It is also quite common for debts to be discharged or written off after death, and council tax is no different. Informing the relevant council could be enough to stop them chasing the debt immediately.

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Debt Solutions

There’s no shortage of council tax debt solutions, so if you’re struggling with yours, please check out the table below to find something that suits your needs.

Debt Strategy	How It Can Help With Council Tax Arrears
Flexible Payment Arrangements	Local councils often offer the option to spread council tax payments over 12 months instead of the standard 10.
One-Off Payment	If feasible, pay council tax in full and potentially negotiate a slightly reduced amount.
Hardship Schemes	Council Tax Reduction (CTR) Discretionary Relief Hardship Funds Support for Vulnerable Individuals COVID-19 Specific Support Charitable Grants
Discounts and Exemptions	Check for eligibility for discounts (e.g., single-person discount of 25%) or exemptions (e.g., properties unoccupied due to the resident’s death, properties where everyone’s a full-time student, or a resident has severe mental impairment)
Deferred Payments	Some councils allow deferring payments wherein you’ll pay less now and make up for it later.
Challenge your Council Tax Band	If you believe your property’s council tax band is incorrect, you can challenge it to potentially lower future payments and refund previous overpayments.
Debt Solutions	Certain formal debt solutions like Debt Relief Orders (DRO), Bankruptcy, and Individual Voluntary Arrangements (IVA) can potentially write off council tax arrears,
Professional Debt Advice	UK residents can seek free advice from debt organizations and charities for council tax guidance tailored to their specific financial situation.