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Trusts and tax issues

The taxation of trusts is an area which can be complicated. The creation of a trust creates a new tax entity which can potentially attract inheritance tax (when the trust is set up, if the trust is over the nil rate band, currently £325,000) and both income tax and capital gains tax at the highest rates during the lifetime of the trust.

  • The tax regime differs within the different types of trusts and the trustees need to keep up to date with developments in the taxation of trusts

      In discretionary trusts, the trustees should consider payments of income to beneficiaries who are non-tax payers or lower rate tax payers as the beneficiaries may reclaim the difference between their rate of tax and the tax paid at the prevailing top rate of tax by the trustees. There are special rules where the income consists of dividends as the trustees can find themselves in the situation where they have made an overpayment to the beneficiaries and not retained sufficient monies if they have distributed the whole of the income received. It is for this reason that careful records need to be kept of all income received and consideration needs to be given to the tax consequences of distributions made to beneficiaries.

  • All trusts, whatever type they are, need to be reviewed regularly

      We provide a service which covers the setting up of the trust through to the bringing the trust to an end and covers all aspects in relation to the ongoing administration of the trust together with the preparation of the trust tax returns as required.