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Trusts
Tax rates 2004/05The 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. |
Proposals for 2005/06The 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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