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Tax changes for Discretionary Trusts
Before the recent change of government, the previous Chancellor Alistair Darling increased the highest rate of income tax to 50%.
As a consequence the tax rate applicable to discretionary trust increased, however without the benefit of the £150,000 tax band. Any income over and above the £1000 basic rate will be taxed at the 50% level.
On top of the increase in Income tax the recent emergency budget increased capital gains tax on certain types of trustee investment from 18% to 28%.
Trusts are also disadvantaged as the CGT free threshold is only £5050.
Taking into account all of the tax changes trustees have a responsibility to review existing trust arrangements. There are a number of ways to reduce the tax paid by trusts.
Trustees should carefully consider any proposed changes. We would recommend that trustees seek independent financial advice from a specialist that deals with trustee based investments.
Before the recent change of government, the previous Chancellor Alistair Darling increased the highest rate of income tax to 50%.
As a consequence the tax rate applicable to discretionary trust increased, however without the benefit of the £150,000 tax band. Any income over and above the £1000 basic rate will be taxed at the 50% level.
On top of the increase in Income tax the recent emergency budget increased capital gains tax on certain types of trustee investment from 18% to 28%.
Trusts are also disadvantaged as the CGT free threshold is only £5050.
Taking into account all of the tax changes trustees have a responsibility to review existing trust arrangements. There are a number of ways to reduce the tax paid by trusts.
Trustees should carefully consider any proposed changes. We would recommend that trustees seek independent financial advice from a specialist that deals with trustee based investments.
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