Introductory guide to the taxation of trusts
Introductory guide to the taxation of trusts

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Introductory guide to the taxation of trusts
  • Type of trust
  • Inheritance tax
  • Income tax
  • Capital gains tax
  • Other taxes relevant to trusts
  • Taxation of offshore trusts

FORTHCOMING CHANGE: As originally announced at Autumn Budget 2017 and followed up by written statement after Spring Statement 2018, plus an announcement in Budget 2018, the government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, in July 2019, the Office of Tax Simplification issued its second report on inheritance tax. See also the report published by the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime. See also the research exploring the use of trusts which was also published on 7 November 2018. See News Analysis: Exploring the consultation and review on the taxation of trusts.

The taxation of trusts is based on the personal tax regime. Trusts are subject to the same taxes as individuals (income tax, capital gains tax (CGT) and inheritance tax (IHT)) but the application of those taxes varies according to the status and terms of the trust. The most important factor in determining the tax treatment of the trust will be to establish what type of trust it is (ie what the entitlement of the beneficiaries is). Other relevant factors relevant to the tax treatment of