yearly legacy

[john2016]

A close friend of mine that passed away last year included within his Will that I should be paid a legacy/payment of £10000 per annum throughout my life.. His family have a substantial business which passed to them on his death and I presume the payments will come from there.
However in my hands is this treated each year as a legacy and free of tax or do I have tax complications.

[AGoodman]

I can't quote the law but I strongly suspect you would be subject to income tax on the basis it is an annuity.

This may be either because the payment is made from trust income or because of a rule that an annual payment from capital should be treated as income (see TSEM3784
).

[maths]

The payment of a legacy in instalments is in effect an annuity.

You will therefore be subject to income tax on each payment and the PRs are under a duty to deduct income tax at the basic rate on making each payment.

You haven't indicated the wording of the will.

One option may be to ascertain whether the PRs will pay a one off lump sum (equal to the present value of the annuity). Such a sum would not be subject to tax on your part (or the PRs).

AG's reference to payments from capital possibly constituting income will depend upon the wording of the will and if applicable not tax efficient.

[john2016]

Thank you for the replies.
If I may clarify further. I was not included as a beneficiary under the deceased's will. However the will stated that it was the deceased's 'wish' that when possible the deceased's family would pay me £10000 per year. My understanding is that there is no actually legal obligation on them to make such a payment, it is purely up to them.
Does that make any difference?

[maths]

Your last post contradicts your first spouse.

Not possible to be definitive.

However, likely that no trust has been created by the deceased and thus any gifts to you will be made by the beneficiaries under the will and constitute PETs for IHT.