Bare Trust Winding Up Interest

Malcmandy · 10 May 2018 at 6:06AM

Hi, I am the Beneficiary, along with one other of a Bare Trust, which due to the death of the Settlor is now to be wound up. This has been in force for 11 years. There is no tax on the original amount but there will be tax to pay on about £40.000 of Interest for my share.
I am a non-tax payer, being just below the limit.
Any idea of how to work out my tax would be great. I believe that top-slicing may come into it, as I would be put into the 40% tax bracket.
I transfer the £1180 Allowance to my spouse.
Thank you.

jimmo · 10 May 2018 at 10:40PM

As you have referred to top-slicing I presume that the bare trust is some form of Life Policy or Bond. In that case the insurer will issue a chargeable event certificate stating the amount of the chargeable event gain and the number of relevant years.

To determine whether you will have to pay tax the first step is to calculate your liability taking into account your income from all sources including the full chargeable event gain. Note that in that calculation you need to include your full personal allowance and, I believe, if you are liable to higher rate tax you will not be eligible to transfer part of your personal allowance to your spouse for the tax year. Marriage Allowance is not specifically mentioned in the following link but it does set out the principle. It also explains the remaining steps in the calculation of Top Slicing Relief.
https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm3840

Bare Trust Winding Up Interest

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