Budget 2006

Budget 2006

Introduction

Personal Taxation

Employee Taxation

Investment Reliefs

Capital Gains Tax

Trusts

National Insurance Contributions

Tax Credits

Inheritance Tax

Business Tax

Corporation Tax

Value Added Tax

Stamp Duty

Insurance Premium Tax

Trusts

Trusts are liable to income tax on income and CGT on gains for each tax year. The trustees are responsible for filing self assessment tax returns by the normal date (31 January 2008 for 2006/07) and paying the tax on the normal dates (payments on account of income tax on 31 January and 31 July 2007, and the balance of income tax and the whole of the CGT on 31 January 2008).

The tax rates applicable to trusts are:

	Life interest	Discretionary
Rate on general income (profit, rent)	22%	40%
Rate on savings income (interest)	20%	40%
Rate on dividend income	10%	32.5%
Rate on capital gains	40%	40%
CGT annual exemption	£4,400	£4,400

Discretionary trusts for vulnerable beneficiaries (such as disabled people) can pay tax at the lower rates if an election is made. For 2006/07, discretionary trusts pay tax at the lower rates on income up to £1,000.

The CGT annual exemption is divided between trusts established by the same settlor since 1978, to a minimum of £880.

Trusts are also liable to pay inheritance tax in a variety of circumstances, and trustees should make sure that they have appropriate professional advice to enable them to fulfil all their legal and fiscal responsibilities.