Changes to the Taxation of Low Income Trusts and Estates

From 6 April 2024 Trusts and Estates with income of all types up to £500 (including investment and rental income) will not pay income tax on the income as it arises. Tax will still be payable on the full amount when the income is more than £500.

• For Trusts, the de minimis amount is reduced for some groups of trusts set up by the same settlor

• For Accumulation and Discretionary trusts with income that exceeds £500 the default basic rate (20%) and dividend ordinary rate (8.75%) will no longer apply to the first £1,000 of trust rate income

• Tax pool adjustment payments, due when a discretionary distribution is made, continue to be payable, irrespective of the level of trust income in a year

• For Estates, the £500 tax-free amount will apply to all types of income, after excluding ISA income which continues to be exempt after a person has passed away until closure or up to 3 years following the death.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

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