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Trusts are liable to income tax on income and CGT on gains for each tax year. The trustees
are responsible for filing self assessment tax returns by the normal date (31 January 2009 for
2007/08) and paying the tax on the normal dates (payments on account of income tax on 31 January
and 31 July 2008, and the balance of income tax and the whole of the CGT on 31 January 2009).
The tax rates applicable to trusts are:
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Life interest |
Discretionary |
| Rate on general income (profit, rent) |
22% |
40% |
| Rate on savings income (interest) |
20% |
40% |
| Rate on dividend income |
10% |
32.5% |
| Rate on capital gains |
40% |
40% |
| CGT annual exemption |
£4,600 |
£4,600 |
Discretionary trusts for vulnerable beneficiaries (such as disabled people) can pay tax at the lower
rates if an election is made. Discretionary trusts pay tax at the lower rates on income up to £1,000.
The CGT annual exemption is divided between trusts established by the same settlor since 1978, to a
minimum of £920.
Trusts are also liable to pay inheritance tax in a variety of circumstances, and trustees should make
sure that they have appropriate professional advice to enable them to fulfil all their legal and
fiscal responsibilities.
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