Budget 2004
Introduction
Personal
Income Tax
Tax Credits
National Insurance Contributions
Employees
Pensioners
Savings
Trusts
Capital Gains Tax
Inheritance
Tax
Stamp Duty / Stamp Duty Land
Tax
Corporation Tax
Business Tax
Value Added Tax
Other Measures
Tax
Tables
National Insurance
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Trusts
Tax rates 2004/05
The tax rates for discretionary trusts are increased to 40%
on general and interest income (from 34%) and 32.5% on dividends
(from 25%). This brings these rates in line with those payable
by a higher-rate taxpaying individual, and means that no income
tax can be saved by retaining income within such a trust. Distributions
of income to beneficiaries will now come with a tax credit representing
40% of the gross income paid out, or 40/60 of the net payment.
Trustees will have to be very careful with their calculations
following the change of rates, because they are likely to be
giving out larger tax credits (at 40%) than the tax they have
paid on the income (at 34%). This leads to a liability to pay
the difference to the Revenue.
The CGT rate for all trusts increases to 40% (from 34%). As
the beneficiaries do not receive any credit for CGT paid by
the trust, this is a straightforward tax increase.
Proposals for 2005/06
The Revenue have published a consultative document proposing
a number of significant changes to discretionary trusts for
2005/06, and also trusts in which the settlor has retained an
interest. Trustees will need to keep themselves informed about
the progress of these proposals, because they may lead to planning
opportunities and pitfalls around 5 April 2005.
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