Reclaiming Overpaid Tax and Marriage Allowance After a Death

If your husband or wife died part way through a tax year, there is a good chance HMRC owes the estate a refund. The pay-as-you-earn system spreads a whole year's tax evenly across twelve months, on the assumption that the income will keep coming. When someone dies in, say, August, the income stops but the tax already deducted was calculated as though it would run to the following April — so too much has usually been paid, and the balance is due back.

You do not claim this refund as a grieving relative pocketing a windfall. It is claimed by the personal representative — the executor named in the will, or the administrator if there is no will — and the money is paid to the estate, where it is shared out with everything else according to the will or the rules of intestacy. It is worth pursuing even where the sums feel small, because it is money that belongs to the estate and a refund left unclaimed simply stays with HMRC.

Two separate things are often tangled together here, and it helps to keep them apart. One is the ordinary reconciliation of the year of death, which produces the refund described above. The other is marriage allowance, a transfer of unused tax-free allowance between spouses that can still be claimed after a death and backdated. Both are covered below.

Why tax is usually overpaid in the year of death

Income tax through PAYE works on a running total. Your tax code hands you a slice of your tax-free personal allowance each pay period, and the payroll calculates the tax due so far against the income received so far. It assumes the pattern will continue for the full year. When death cuts the year short, the person has received less income than the code was built around, and often has more unused personal allowance than the deductions so far reflect. The result is that the tax already taken is more than the final bill turns out to be.

The same can happen with pension income, savings interest that had tax deducted, and any employment that ended mid-year. None of this corrects itself automatically the moment someone dies. HMRC reviews the year of death once it has the final figures, works out the true liability up to the date of death, and issues a calculation showing whether tax was overpaid or, occasionally, underpaid. Where it was overpaid, a repayment is made to the estate.

It is not always a refund. If income was high and not enough tax had been collected — some pension arrangements or untaxed income can produce this — the year of death can instead leave a small amount owing, which becomes a debt of the estate. Either way the point is the same: the year needs squaring up, and the personal representative is the person who has to see it through.

Who can claim, and how HMRC is told

The claim belongs to the personal representative. If there is a will, that is the executor; if there is not, it is the administrator, who gets authority through letters of administration. Until someone holds that role formally, HMRC will not deal with a relative simply because they are close family, because the refund is an estate asset and it has to go to whoever is entitled to administer the estate.

HMRC can be told about the death in a couple of ways. The free Tell Us Once service, available when you register the death in England, Wales and Scotland, reports the death to HMRC along with the DWP, the DVLA and other government departments in a single step. Where Tell Us Once is not used or not available, you can notify HMRC directly. Once HMRC knows, it will look at the tax records and, in a straightforward PAYE case, work through the year of death and write to the personal representative with the outcome.

Keep the paperwork that lets HMRC finish the sum. That means the final P60 or P45 from any employment, the P60 or statements from any pension in payment, and details of savings interest and dividends. Correspondence about tax may keep arriving in the deceased person's name for a while, which is one more reason to arrange to redirect and stop post addressed to someone who has died so that nothing important is missed among it.

Marriage allowance: still claimable, and backdatable four years

Marriage allowance is a quiet, widely-missed relief for married couples and civil partners. It lets a husband, wife or civil partner who has not used all of their tax-free personal allowance transfer a fixed slice of it — 10% of the personal allowance — to their partner, provided the partner is a basic-rate taxpayer. The receiving partner then pays less tax. Across a marriage where one earned little and the other paid basic-rate tax, it can add up to a meaningful sum, and many couples never claimed it while both were alive.

Source: HM Revenue & Customs, Marriage Allowance guidance, GOV.UK, published under the Open Government Licence v3.0.

A death does not close the door on it. A claim can still be made in respect of a person who has died, and — this is the part that matters most — a claim can be backdated up to four tax years, so long as the couple met the conditions in each of those years. That means a claim made now can potentially recover relief for several earlier years as well as the year of death. Because you cannot make a claim for a deceased person through the ordinary online route, you contact HMRC directly to do it, and it helps to have the National Insurance numbers of both partners and a rough idea of each person's income for the years in question.

It is worth being clear about the two directions this can run, because it confuses people. The unused allowance can flow from the person who died to the survivor, or the survivor's unused allowance may have been supporting the person who died — the right way round depends on who earned what. HMRC will work out which years qualify. The full details of who is eligible are on the GOV.UK marriage allowance pages.

Where the refund goes, and how long it takes

Any repayment is made to the estate, not handed to a relative as their own money. In practice HMRC pays it to the personal representative to bank into the estate account, from where it is distributed with everything else. That distinction matters if beneficiaries are watching the figures, because the refund has to appear in the estate accounts like any other asset. It sits alongside other money owed to the estate, such as dividends and share proceeds due in the deceased person's name, and all of it forms part of what is eventually shared out.

On timing, be patient and be organised. Several months is common, because HMRC waits for final figures from employers and pension payers before it can finalise the year, and those third parties report on their own schedules. There is no fixed turnaround you can hold HMRC to. Keeping a tidy file of the P60s, P45s, pension statements and any letters HMRC sends will shorten the back-and-forth, because the delay is usually caused by missing figures rather than by anything sinister.

If a self assessment return was being filed

The picture is different where the person completed a self assessment tax return each year — someone self-employed, a company director, a landlord, or anyone with untaxed income. In that case the year of death is not simply reconciled through PAYE. A final self assessment return may be needed covering the period from the start of the tax year up to the date of death, and it is the personal representative's job to file it.

That final return can produce a refund or a bill, and it interacts with the rest of the estate's tax affairs, including any tax due on income the estate itself receives while it is being administered. Where the person's affairs were at all complex — a business, several income sources, or overseas income — this is a point at which it is sensible to use an accountant, because getting the final return wrong can hold up the whole estate. Money that comes in after death for work done beforehand has its own rules, which we cover in what an estate can and cannot reclaim before probate alongside the wider question of expenses.

Reclaiming a refund is, in the end, recovering money the estate already had. It does nothing to answer the harder question a death exposes, which is whether there was enough set aside to meet what the estate owed and to leave the survivor secure. If that is a question you are now asking about your own affairs, an FCA-authorised broker can help you get life insurance quotes priced against your actual circumstances rather than a guess.

Scotland and Northern Ireland

Income tax refunds and marriage allowance are administered by HMRC across the whole UK, so the right to reclaim overpaid tax and to claim or backdate marriage allowance is the same wherever the person lived. The personal allowance itself, and marriage allowance, are set by the UK government and apply everywhere.

The difference in Scotland is the rate at which income tax is charged. Scottish taxpayers pay income tax at rates and in bands set by the Scottish Parliament, which differ from those in the rest of the UK, so a Scottish taxpayer's refund for the year of death is calculated using Scottish rates. It does not change your right to the refund, only the arithmetic behind it. In Northern Ireland income tax works as it does in England and Wales, but the estate administration around it runs through Northern Ireland's own probate system, and Tell Us Once is not available there, so HMRC is notified directly instead. None of these differences reduces what can be reclaimed; they change who you deal with and how the figure is worked out. You can work through the tax alongside the rest of the estate using our guide to bereavement admin, assets and contracts.

Frequently asked questions

Who claims a tax refund for someone who has died?

The personal representative, meaning the executor or administrator. HMRC is told of the death through Tell Us Once or directly, then reviews the tax year and issues a calculation. Any refund is paid to the estate rather than to a relative personally, and forms part of what is distributed. Until someone holds the role of executor or administrator formally, HMRC will not deal with a relative simply for being close family.

Can marriage allowance still be claimed after a death?

Yes. A claim can be made where one husband, wife or civil partner had unused personal allowance, including for earlier years, and claims can be backdated up to four tax years. A claim can still be made in respect of a partner who has died. Because it cannot be done through the ordinary online route for a deceased person, you contact HMRC directly, with both National Insurance numbers and each person's income to hand.

How long does HMRC take to sort out the year of death?

It varies, and several months is common, because HMRC waits for final figures from employers and pension payers. Keep P60s, P45s and pension statements. Where a self assessment return was normally filed, a final return may be needed for the period up to the date of death, which can add further time and is worth handing to an accountant if the affairs were at all complex.