TSEM3011 - Trust income and gains: the charge on trustees - amount of trust income chargeable

From 6 April 2024, most trusts with income of all types up to a tax-free amount of £500 do not pay income tax on that income as it arises.  Where income exceeds that amount, tax will be payable on the full amount. 

Basic etc. rate charge on trustees

Trustees of a settlement are chargeable at the basic rate or dividend ordinary rate on trust income without any deduction for trust management expenses.

They may also be chargeable at the higher 'special rates for trustees'.

Interest in possession trust

Trustees of an IIP are not normally chargeable at the special trust rates. The exception is when the trustees have certain capital receipts that are deemed to be income for tax purposes. See TSEM3201.

Accumulation or discretionary trust

If the trust is within ITA/S479, the special trust rates apply to income after trust management expenses. The special trust rates are the dividend trust rate in respect of dividend type income and the trust rate in respect of other income. TSEM3019 explains which income is within ITA/S479.

Tax case

Reid’s Trustees v CIR 14 TC 512. TSEM7055