Rachel Conroy, a Harrison Drury trusts’ expert, outlines the new trust rate of income tax that comes into place 6th April 2010.
From 6 April 2010 the trust rate of income tax increases by 10% to 42.5% for dividends and 50% for all other income.
Trustees should consider:
1. Their investment policy – is income necessary or would investments producing capital growth rather than income be appropriate? Capital Gains Tax would be charged on the increase in value when the investment was sold. Capital Gains Tax is currently charged at a relatively low rate of 18% so this could result in a tax saving. (If this is to be considered appropriate investment advice should always be taken).
2. Which of the beneficiaries they choose to appoint income to. If the trustees appoint income in favour of beneficiaries who pay no tax or pay tax at the lower rate the beneficiaries may then be able to reclaim some of the tax paid by the Trustees from HM Revenue & Customs.
3. Whether the trust is still necessary. In some cases it may be appropriate to wind up the trust and appoint all of the funds to one or more of the beneficiaries.
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