Protecting personal tax allowance from estate tax

Hi, I am the Personal Representative for a deceased's estate, It's a very straightforward estate with only bank and savings accounts, totalling circa £250,000. Probate has been granted and I am currently collecting in the assets. Money is being held in a savings accounts, in my name, which is used exclusively for the estate. 45% of the estate has been gifted to me in the will. I understand I am required to informally notify HMRC of any interest earned on the estate during the administration process and that I will have to pay 20% tax on this interest. My question is, how do I ensure separation between estate income tax, and my own personal allowance. My worry is the bank (understandably) will notify HMRC of the interest earned at the end of the year and this will impact my own personal tax code, despite it being held as part of an estate during the administration process. I'm sure this is a common issue but I cannot find an answer. Many thanks.

Hi
As the account is in your name, yes it would automatically be taken as your income and form part of your savings allowance.
You would need to have an account that was in the name of estate or you as the executor of the estate so that its not yours personally.
You should discuss this with your bank.

Thank you for the reply. Interestingly the three banks I have spoken to no longer open Executor accounts as they deem them unnecessary. It seems I am caught between a rock and a hard place. Is there an alternative mechanism for claiming my allowance back if I am unable to open such an account?

Hi dreye148,
You would need to write in with evidence to support the claim that one of the accounts is for the estate and not yours personally.
Thank you.

Banks do not provide accounts in any name other than individual(s) names (e.g. for executors, "Executor of ...") other than business accounts, for which there are other naming restrictions (and costs). This is probably in part due to AML regulations. Given interest rates have not been sub 1% for some time now and inflation is non-negligible, personal representatives (PRs) would not be acting in the best interests of beneficiaries if they did not avail themselves of interest bearing accounts. Since HMRC's savings "allowance" for IHT is only £500, this is going to become a considerable issue for HMRC: Might I suggest HMRC look into enabling PRs to declare to HMRC bank accounts used for the management of Estates. Also for declaring assets appropriated (by means of "bare trusts") and their ultimate beneficiaries.

dreye148, it would be great to know if you were successful presenting evidence to HMRC . It should be reasonably easy to do this and I would have thought HMRC will be keen to enable such reporting in the absence of the banks providing executor easy access payment accounts that pay interest. The typical (albeit rare) executor account current account pays jack-squat so HMRC should prefer 20% of something rather than 20% of nowt. I have this dilemma to address soon and as Tony indicates my obligation to beneficiaries is to use an interest bearing account.