Sivenson Trust

SIVENSON TRUST
5 FORCES tug-of-war: Taxman-Council-Settlor-Beneficiary-Trustee

4 Types of TAX BILLS > 1. Entry tax – 2. Annual tax – 3. Ten Yr Anniversary tax – 4. Exit tax

The trusts have been classed in 3 Menus based on level of complexity ( from Menu 1 to 3) 

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TRUST INCOME TAX

https://www.gov.uk/trusts-taxes

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  • Different types of trust income have different rates of Income Tax.
  • Each type of trust is taxed differently. Trusts involve a ‘trustee’, ‘settlor’ and ‘beneficiary’.

  • Accumulation trusts or Discretionary trusts

     

     

  • Trustees are responsible for paying tax on income received by accumulation or discretionary trusts. The first £1,000 is taxed at the standard rate.
  • If the settlor has more than one trust, this £1,000 is divided by the number of trusts they have. However, if the settlor has set up 5 or more trusts, the standard rate band for each trust is £200.

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    Trust income up to £1,000     < >   Trust income above £1,000

     

  • Dividend-type income: 8.75%                      * Dividend-type income: 39.35 %
  • All other type of income : 20%                     * All other type of income:  45%
  • Dividend Allowance: Trustees do not qualify for Dividend Allowance. It means trustees pay tax on all dividends depending on the tax bands they fall within.

  • Interest in possession trusts

  • The trustees are responsible for paying Income Tax at the rates below.
  • Dividend-type income: 8.75%
  • All other type of income: 20%
  • Sometimes the trustees ‘mandate’ income to the beneficiary. This means it goes to them directly instead of being passed through the trustees.
  • If this happens, the beneficiary needs to include this on their Self Assessment tax return and pay tax on it.

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    Bare trusts

     

  • If you’re the beneficiary of a bare trust you’re responsible for paying tax on income from it.
  • You need to tell HMRC about the income on a Self Assessment tax return.
  • If you do not usually send a tax return, you need to register for self-assessment by 5 October following the tax year you had the income.

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    Settlor-interested trusts

     

  • The settlor is responsible for Income Tax on these trusts, even if some of the income is not paid out to them. However, the Income Tax is paid by the trustees as they receive the income.

  1. 1. The trustees pay Income Tax on the trust income by filling out a Trust and Estate Tax Return

  2. 2. They give the settlor a statement of all the income and the rates of tax charged on it.

  3. 3. The settlor tells HMRC about the tax the trustees have paid on their behalf on a Self Assessment tax return.

  4. > The rate of Income Tax depends on what type of trust the settlor-interested trust is.

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TRUST GAIN TAX
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TRUST INHERITANCE TAX
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4 Cases when Inheritance tax is due
1. When assets are transfered into trust

2. On trust 10 year anniversary

3. When assets exit trust or trust end

4. On death and trust form part of estate

6%- ITEC- Inheritance Tax Exit Charge- Inheritance Tax is charged up to a maximum of 6% on assets — such as money, land or buildings — transferred out of a trust. This is known as an ‘exit charge’ and it’s charged on all transfers of relevant property.