Trusts and the 50% Tax Rate

What are the changes?

Following the 2009 budget, you will no doubt be aware that the higher rate of income tax will rise from 40% to 50%, effective from 6 April 2010, for individuals earning over £150,000 of annual income. 

What you may not be aware of is that this new 50% rate will also apply to most income received in excess of £1,000 by Discretionary Trusts and Accumulation and Maintenance Trusts (which were originally taxed at 40%) and some income received by other Trusts.

On the face of it this is bad news for family Trusts and makes setting up a discretionary Trust or an Accumulation and Maintenance Trust somewhat less favourable than it once was, however the good news is that there are steps that Trustees can make in order to help mitigate the extra tax charges that will arise as a result of these changes.

How will this affect my Trust and what can be done?

The impact of these changes will differ for different types of Trusts. For further information please click here.