Bank, building society and other types of interest are taxable when paid to the recipient. The amount of interest earned is not apportioned over the period to which it relates. So if an annual interest payment is received after the date of death, no part of it is taxable on the deceased, but all of it is taxable on the personal representatives.
When interest is recognised for inheritance tax (IHT) is different to income tax. IHT requires that interest accrued up to the date of death is included in the value of the estate at death.
These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.
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