Trustee Investment – Help for Trustees
It often used to be the case that to avoid tax one simply tucked assets away in trust. Sadly for trustees the government has woken up to this in recent years and there has been a succession of changes resulting in the relatively high rates of tax shown below.
Trusts will pay tax on income at the following rates:-
| Type of income | Tax rate – 2022 / 2023 |
|---|---|
| Dividend-type income | 39.35% |
| Interest Distributions | 45% |
A lower rate of 8.75% and 20% respectively applies to the first £1,000 gross of trust income.
Trustees do not qualify for the dividend allowance – meaning 100% of dividend income is taxable.
Dividends will be received without any attaching tax credit to set against their liability.
If the settlor has created more than one settlement, the £1,000 will be split equally between each, subject to a minimum of £200 per trust.
This means that trustees should focus their investments on so–called “non income producing assets”. Conveniently, but perhaps confusingly, such assets can produce tax-efficient “income” and often provide capital growth… Contact us
Trustees must have a written investment strategy and review the performance of their investments on a regular basis. Under the Trustee Investment Act 2000 they are also required to take professional, independent, investment advice.
Talis are expert in advising trustees, settlors and beneficiaries.
Past performance is no guarantees of future returns but if the trustees do not do their best to invest trust monies effectively they could face the wrath of the beneficiaries.
Proposed changes to the taxation of trusts from 2024-25
The 15 March 2023 Budget set out proposals to remove the £1,000 standard rate income tax band from 6 April 2024.
A trust that accrues income that does not exceed £500 p.a. from 2024-25 will have this income written down to £0 for tax purposes. Again, this £500 limit is apportioned across all trusts created by the settlor, subject to a de minimis limit of £100 p.a. per trust.
If the trust’s income exceeds £500 p.a. from 2024-25, all income is assessable for income tax.
see also
Inheritance Tax IHT Advice London
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