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What Happens to Tax Debt After Death? 

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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Mar 4th, 2024
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For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

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.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

What will happen to HMRC debt 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 HMRC for tax liability after death 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. 

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

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What happens to council tax debt 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 tax debts 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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Council Tax 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.

HMRC Contact Details

Online Customer Service Contacts Website here
Deceased estate helpline 0300 123 1072
Debts relating to income tax helpline 0300 200 3300

Tax debts after death FAQs

What will happen to debt when you die?
For the most part, personal debt dies with the debtor, but the debts may need to be paid back through the deceased’s estate. If the value of the estate does not cover the debts owed, then the estate is known as an insolvent estate. In the case of council debts, these could be passed on to joint tenants, tenants in common or when the property is owned and lived in by a surviving individual. This is the case even if that person was not named on the council account.
Is family responsible for deceased debt?
A family is not directly liable for debts left behind by someone. However, if a family member is named as an executor of the will, he/she will need to ensure all debts are paid back from the estate before distributing the estate to beneficiaries of the will. If they fail to do their due diligence, they could owe the debt themselves.
Is tax debt forgiven when you are dead?
Tax debt is not forgiven when you die. HMRC will request that any income tax or national insurance owed is paid from the person’s estate when applicable. If the deceased does not have enough money left to pay the debt, no family member will be asked to pay. It is more likely for most people that HMRC will owe a tax repayment to the person who has died, which will be added to their estate.
Is there a service to help with a deceased’s tax debt?
There is an advice service offered by HMRC to help with probate and specifically tax repayments after death. You might want to get further advice via a probate legal service or a debt charity. Find and contact a debt charity from here!
Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

References

  1. Big Issue – Council tax debt is spiralling across England as households struggle with cost of living crisis
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The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.