Tax and Trust for Children

Anthear

After some advice about a Will trust that has been created by my parents' Wills...

I (stupidly) thought that as a child pays no tax, then a Trust funds set up for them would not either. But I am wrong!

Is there any way around this? If, for example, I choose funds (Unit Trusts) that are accumulative rather than income paying, is there a tax liability there? I am rather peeved that the Trust pays tax on the dividends paid :-(

Thanks in advance

Anthear

Yes, you are correct, once the personal allowance has been exceed - the point I was attempting to make is that a Trust set up for a child does not have an allowance, which makes it tax inefficient, to my mind...

Ref the accumulation of units - thanks for the clarification - I feared that would be case; yes, the income is used to buy new units rather than being paid out.

Are there any legitimate ways around the Trust paying tax on its income from investments?

xylophone

What type of trust has been set up for the child?

Is it bare or discretionary?

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0316

It is on the type of trust that the way it is taxed depends.

http://www.thepfs.org/knowledge/technical-articles/articles/new-tax-year-for-trusts-trustees-and-beneficiaries/40936

http://www.prescient-financial.com/docs/Bare%20trust%20returns.pdf

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

http://www.tolleytaxtutor.co.uk/taxtutor/files/subscriber/personal-tax/uk-trusts-and-estates/lectures/1d03.pdf

If unsure take professional advice from an accountant experienced in trust taxation.

Anthear

Ahhhhh. Thank you for this, really useful. Yes, I thought I'd need some specialist advice.

Much appreciated :-)