Year End Tax Review 2010/2011


Lead articles

Looking forward

This year, next year

Rate of change

Pension merry-go-round


Too much NIC

NIC and pensions

Company cars

Tax-free benefits

Childcare vouchers

Business - General

Time to incorporate?

Associated or not?

His and hers

Family bonus

Profit and loss

Show me the money

Can't pay, won't pay?

Turning back the clock

Business - VAT

Standard VAT or flat VAT?

VAT's up again

All Europeans now

A good start for VAT

Happy returns?


Top-up savings

Rainy day money

Capital Gains

Gains favoured

Splitting gains

A place in the country

Holiday lets reprieved


Family fortunes

Where there's a Will

Credits and debits

Benefit going

Piggy banks

Still trustworthy?


Penalty shoot-out

Going online

Paperwork, paperwork

Pay tax later

Opportunity knocks again


Give and save

Non-Domiciled People

Home and away


Interesting times

Still trustworthy?

Trusts may be set up for tax reasons or for other reasons - but the tax rules are important either way. Trusts pay the same tax rates on both income and gains as individual taxpayers. In some cases, a trust will pay higher rate tax, even if the beneficiaries are all lower rate taxpayers. Discretionary trusts pay the highest income tax rate in 2010/11 50% on income above £1,000, and the trustees of such trusts need to consider whether there is anything they can or should do about these heavy tax costs. It may be worth paying out all the accumulated income, creating a life interest, or investing to produce capital gains in future (on which a trust only pays CGT at 28%).

If a trust has a "vulnerable beneficiary" - a disabled person, or a child under 18 one or both of whose parents have died - it's very likely that the beneficiary will have unused allowances and lower rates. The rules allow the trustees to take advantage of the beneficiary's tax reliefs, but the rules are complicated, and professional advice is likely to be needed.

In 2006, Gordon Brown introduced some very controversial changes to the inheritance tax treatment of trusts. These were presented as a way of stopping rich people avoiding IHT, but trusts are a very common device to protect young people from the dangers of having access to too much money too early, and the effects of the changes may be to increase that risk. Anyone whose Will includes a trust, or who has established a trust already, should take advice on the IHT impact of the new rules if they have not already done so. It may be better to leave the trust in place and suffer the tax, but it will be important to understand what the liabilities are.

Action Point!
Are you a trustee or a beneficiary of a trust?