The 2016 Budget report – Trust taxation

Synopsis: This is the extract from our 2016 Budget report covering trust taxation


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Budget announcements

There were no announcements as such in relation to trusts. However, the changes to the CGT rates affect trustees.

When trustees pay CGT, currently the rate is 28%. From 6 April 2016 this rate will reduce to 20% except for carried interest and for chargeable gains on residential property (i.e. property other than that occupied by a beneficiary where the principal residence relief may be available). The 28% rate will also remain for ATED related chargeable gains.

The annual CGT exemption for trusts will be £5,550 in 2016/17. This will be diluted according to the number of trusts created by the same settlor but will never be less than £1,110.

These changes will take effect for disposals made on or after 6 April 2016.

Planning around the Budget announcements

Trustees who are about to dispose of a trust asset which will give rise to CGT at the higher rate should consider waiting until 6 April 2016 to benefit from the lower rate.

Trusts offer an investor a number of tax advantages and one of those will be as a means of obtaining an additional one half CGT annual exemption – even in cases where the settlor’s spouse and/or minor children are beneficiaries under the trust. In the case of a bare trust, it is possible to use the individual beneficiary’s full £11,100 annual exemption. Collective investments geared towards capital growth will frequently be a good way to utilise the trustee’s (or individual beneficiary’s) annual exemption in future years.

Previously announced changes for 2016/17

There were no prior announcements for the 2016/17 tax year.


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