Budget 2004


Personal Income Tax

Tax Credits

National Insurance Contributions





Capital Gains Tax

Inheritance Tax

Stamp Duty / Stamp Duty Land Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance


Tax rates 2004/05

The tax rates for discretionary trusts are increased to 40% on general and interest income (from 34%) and 32.5% on dividends (from 25%). This brings these rates in line with those payable by a higher-rate taxpaying individual, and means that no income tax can be saved by retaining income within such a trust. Distributions of income to beneficiaries will now come with a tax credit representing 40% of the gross income paid out, or 40/60 of the net payment. Trustees will have to be very careful with their calculations following the change of rates, because they are likely to be giving out larger tax credits (at 40%) than the tax they have paid on the income (at 34%). This leads to a liability to pay the difference to the Revenue.

The CGT rate for all trusts increases to 40% (from 34%). As the beneficiaries do not receive any credit for CGT paid by the trust, this is a straightforward tax increase.

Proposals for 2005/06

The Revenue have published a consultative document proposing a number of significant changes to discretionary trusts for 2005/06, and also trusts in which the settlor has retained an interest. Trustees will need to keep themselves informed about the progress of these proposals, because they may lead to planning opportunities and pitfalls around 5 April 2005.


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