The full personal tax allowance in the year of death is £12,570, and it applies no matter when in the tax year the person died. HMRC does not reduce or pro-rate it based on how many days or months the person was alive. Someone who dies on 10 April, four days into the new tax year, is entitled to the same tax-free amount as someone who lives through to 5 April the following year. Because of how PAYE works, that rule leaves many estates owed a refund.
Why the Estate Is Often Owed a Refund
PAYE assumes income will arrive evenly across all twelve months of the tax year, so it releases the personal allowance in monthly or weekly slices. By the end of month three, only a quarter of the £12,570 has been applied against wages or pension payments. If the person dies at that point, PAYE has given them three months’ worth of tax-free income, but the law entitles them to the whole year’s worth. The gap between what PAYE deducted and what is actually owed usually comes back as a refund to the estate.
If total income from 6 April up to the date of death falls below £12,570, no income tax is due for the year at all. Any tax collected through PAYE in that period is reclaimable.
The Taper for Higher Earners
The full £12,570 is not available to everyone. Where adjusted net income exceeds £100,000, the allowance drops by £1 for every £2 over the threshold, and disappears entirely at £125,140.1GOV.UK. Income Tax Rates and Personal Allowances The taper applies in the year of death exactly as in any other year, using actual income from 6 April to the date of death rather than a projected annual figure.
A high earner who dies in May can still cross the £100,000 mark on two months of earnings alone, particularly where a large bonus, pension lump sum, or share vesting falls in that window. The estate then gets a reduced allowance, or none, despite the short tax period.
Marriage Allowance in the Year of Death
Marriage Allowance transfers £1,260 of personal allowance from one spouse or civil partner to the other, cutting the recipient’s tax bill by up to £252 for the year.2GOV.UK. Marriage Allowance A death during the year does not cancel the transfer, and the outcome depends on which partner died.
If the recipient of the transferred allowance dies, their estate is treated as having the boosted personal allowance of £13,830 for the full year, and the surviving spouse reverts to the standard £12,570. If the transferring partner dies first, the survivor keeps the reduced allowance until 5 April, and the deceased’s estate is treated as having the lower amount.3GOV.UK. Marriage Allowance – If Your Circumstances Change There is no mid-year clawback either way.
A surviving spouse can also backdate a new Marriage Allowance claim by up to four years. If the couple never applied while both were alive, that is worth checking, because it can recover up to four years of the £252 annual saving.
Getting the Refund or Final Bill Settled
The quickest way to start the process is the Tell Us Once service, which notifies HMRC, the Department for Work and Pensions, and local council services in a single step.4GOV.UK. What To Do After Someone Dies – Tell Us Once HMRC then contacts the personal representative with instructions.
For someone taxed only through PAYE, HMRC gathers final figures directly from employers, pension providers, and the DWP, then issues a P800 tax calculation or a simple assessment showing whether a refund is due or tax is owed. The personal representative does not need to file a Self Assessment return; HMRC starts the reconciliation once it has the data. Any refund is paid to the estate rather than to individual beneficiaries.
If the deceased was already in Self Assessment, HMRC will tell the personal representative whether a final return is needed and send the form. That return covers income from 6 April to the date of death and must reach HMRC by the deadline stated in the letter.5GOV.UK. Self Assessment Tax Returns – Returns for Someone Who Has Died
The Allowance Ends at the Date of Death
The personal allowance belongs to the individual, not to the estate that continues after them. Any income the estate generates from the date of death onwards, such as interest on bank accounts, rental income, or dividends, is taxable with no tax-free threshold at all. The estate pays basic rate on that income: 20% on most types and 8.75% on dividends.
That distinction matters when working out what the £12,570 can and cannot cover. It applies to the deceased’s own income up to the moment they died. Everything the estate earns after that point sits in a separate tax pot with its own rules, and the personal allowance has no role in it.