Latest HMRC Trust Statistics


HMRC published its Trusts Statistics 2018 last week. It has been reported that the number of UK family trusts and estates which are required to complete a full self-assessment return has fallen from 164,500 in 2014/15 to 158,500 in 2015/16.

HMRC states that the decrease in the number of trusts and estates covered by these statistics may be a result of gradual changes in behaviour following an increase in the trust tax rate in 2004 which could have made trusts less attractive.

Currently, the rate of tax payable on the non-dividend income of discretionary trusts is 45% (above the £1,000 standard rate band). Dividends received by the trustees of discretionary trusts do not qualify for the current £5,000 dividend allowance (which will decrease to £2,000 in 2018/19) and are all taxed at 38.1% (above the £1,000 standard rate band). Capital gains on investment gains are taxed at 20% beyond the trust’s annual exemption (normally half that for individuals).

Interestingly, even with increased income tax rate(s), the total income reported by trusts and estates increased over the year whereas capital gains tax liabilities decreased. But it’s not all about tax, because trustees have other reporting obligations which need to be satisfied and, of course, in some cases day to day administration which needs to be carried out can be onerous.

For this reason, many trustees favour life assurance-based investment bonds (UK and offshore) as they are non-income and non-capital gains producing assets. This means that the trust administration is simplified as it keeps them out of assessment until a chargeable event gain arises – and, in many cases, segment/cluster assignment is chosen as a means of passing the income tax liability on to a beneficiary. Note, however, that the assignment could generate a capital exit charge where the trust is discretionary or flexible in nature.



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