TAXATION OF UK TRUSTS/UK TRUST TAXATION
Synopsis: HMRC have confirmed the rate of tax which will apply to dividends falling within a trust’s standard rate band.
In our earlier Bulletin we stated that, in the absence of any draft Finance Bill clause information, HMRC had confirmed that the dividend rate of tax for trusts would be 38.1% from 6 April 2016. However, when revising the Wrapper Tool we came across another dividend/trust query which had not been addressed in the Bill clauses: the rate of tax that would apply to dividends that fell within a trust’s standard rate band.
HMRC have now confirmed that this will be 7.5%, in line with the charge for a basic rate taxpayer on dividend income above the dividend allowance.
This answer is as we expected, but does highlight the relatively generous tax treatment of dividends within UK life companies, where there is no extra tax charge (see our recent Bulletin).
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