Discretionary Trust Tax Rate ?

John_Pierpoint

I am just looking at some figures produced by an accountant.

Discretionary Trusts are taxed like rich individuals.

For bank interest they pay 20% on the first £1,000 of gross income and then 50% on the rest?

What was the rate for tax years 09/10 10/11 & 11/12?

http://www.hmrc.gov.uk/trusts/income-tax/tax-pool.htm

xylophone

Is this of any interest?http://www.furleypage.co.uk/news-events/law-updates/discretionary-trusts-and-the-change-of-the-income-tax-rate-from-40-to-50-with-effect-from-5-april-2010/

SeniorSam

John_Pierpoint wrote: »

I am just looking at some figures produced by an accountant.

Discretionary Trusts are taxed like rich individuals.

For bank interest they pay 20% on the first £1,000 of gross income and then 50% on the rest?

What was the rate for tax years 09/10 10/11 & 11/12?

http://www.hmrc.gov.uk/trusts/income-tax/tax-pool.htm

Trusts are taxed at higher rate tax on income. That's why it is always best to ensure that Trusts do not produce 'income', but growth, on which the Trust is not taxed. This can be done with the investments that are selected by the Trustees, but unfortunately this is often overlooked, or sometimes not even known by the people who set up the Trust and make the investments.

Sam

kidmugsy

Ah, Sam, but how does one buy a bond of the sort that produces growth alone without having to pay high commission rates?

xylophone

http://www.stepjournal.org/journal_archive/2012/step_journal_april_2012/get_it_right_first_time.aspx

might be of interest.

John_Pierpoint

Many thanks everyone.

It is amazing how fast time flies, since Osbourne raised the tax rate to 50%.

On the subject of bonds I found this controversy on the interweb:
http://citywire.co.uk/new-model-adviser/failure-to-plan-can-land-discretionary-trusts-with-60-tax/a378662

SeniorSam

kidmugsy wrote: »

Ah, Sam, but how does one buy a bond of the sort that produces growth alone without having to pay high commission rates?

The answer is life funds. They have growth and not income and IF the IFA knows how to take advantage of the Trust not being taxed, then this is the answer. Yes, there will be charges, but these should soon be recovered to produce growth. Additionally, the Settlor could take a 5% return without paying any initial tax.

The selection of funds is very wide and funds can be switched as required. Fund reviews on a regular basis are important.

Sam

SeniorSam

xylophone wrote: »

http://www.stepjournal.org/journal_archive/2012/step_journal_april_2012/get_it_right_first_time.aspx

might be of interest.

There is a lot of very useful information in this. Just needs to be understood correctly to take advantage of what is out there. Far to many Trust investments are sold without sufficient investment knowledge.

Sam

SeniorSam

John_Pierpoint wrote: »

Many thanks everyone.

It is amazing how fast time flies, since Osbourne raised the tax rate to 50%.

On the subject of bonds I found this controversy on the interweb:
http://citywire.co.uk/new-model-adviser/failure-to-plan-can-land-discretionary-trusts-with-60-tax/a378662

Not so controversal James. This is the wayTrusts should be done - using Life Insurance Investment Bonds. All the advantages available.

Sam