Solicitors Qualifying Examination (SQE) Practice Exa\

How is Income Tax handled by personal representatives?

1. They can use personal allowances

2. They always pay at the basic rate for non-dividend income

3. They are exempt from taxation

4. They pay a flat rate regardless of income

The correct answer is: They always pay at the basic rate for non-dividend income

In the context of how Income Tax is handled by personal representatives, the understanding that they always pay at the basic rate for non-dividend income is accurate. Personal representatives are responsible for handling the estate of a deceased individual, which includes collecting income arising from that estate. When the income is categorized as non-dividend, it is typically subject to the basic rate of Income Tax. Personal representatives are expected to comply with the tax obligations associated with the estate. After a person's death, the personal representatives are essentially acting on behalf of the estate, and any income generated from the estate is taxed at the applicable rates based on the income level. The basic rate is applied up to a certain threshold of income, which aligns with the tax structure in the UK. Personal allowances and exemptions may apply in different circumstances, but they do not alter the fundamental duty of personal representatives to pay Income Tax on behalf of the estate at the established rates. Therefore, this understanding of always paying at the basic rate for non-dividend income captures the essential duty of personal representatives related to Income Tax obligations, reflecting the accurate procedure in handling a deceased's income tax situation.