Trust Tax Rate Increased to 50%

From 6 April 2010 the additional rate of tax for Trusts will rise to 50% with a new higher Trust rate of tax on dividends of 42.5%. If all income is distributed each year from the Trust, then any tax for basic rate taxpayers or non taxpayers can be refunded in the usual way and there will be no overall effect. If income is accumulated, however, the 50% tax will be charged and will therefore not be available for reclaim by the beneficiary. It may therefore be worthwhile considering whether changes need to be made to income distributions from Settlements.

In addition, as the Trust Income Tax rate will be 50% whereas the Capital Gains Tax rate will remain at 18%, it may be worthwhile considering whether the type of investment should be changed depending on the circumstances of the beneficiaries of the Settlement. If income is not currently required then switching to investments with more capital growth may be more beneficial.