News round up for Trustees and Executors

The UK government has implemented reforms to simplify the taxation of low-income trusts, easing the burden on trustees. From 6th April 2024, trusts with income of all types up to £500 will not pay Income Tax on that income as it arises. Where income exceeds that amount, tax will be payable on the full amount. This helps trustees of smaller trusts to avoid excessive paperwork.

From 6th April 2024, the basic rate and dividend ordinary rate of tax that applies to the first £1,000 slice of discretionary trust income has been removed so that all income is taxed at either 39.35% or 45% (with relief for trustee expenses remaining unchanged).

From the 6th April 2024, the income tax reporting by executors and personal representatives during the period of administration has been changed.

Executors or personal representatives administering the estate of someone who has died, have an obligation to account to HMRC for any income tax or capital gains tax arising on their income and gains. Depending on the size of the estate, there is an informal route whereby executors can report by letter to HMRC at the end of the administration period all income and gains during the period or alternatively they need to submit an income tax return.

If all types of income received in a tax year from 24/25 is less than £500, then this income no longer needs to be reported to HMRC and the executors do not need to pay any income tax. Previously this was limited to bank and building society interest and estates received small dividend payments were still obliged to report that income.

If the estate receives more than £500 of income in any one year, then all of the income for that year is reportable and all of the income is taxed.

Those who are familiar with trusts and estates will not be a stranger to HMRC’s Trust Registration Service which was introduced in 2017. Most trusts are required to register but there are still a few exceptions.

If a trust that is supposed to be registered is not, the trustees may get hit with a £5,000 penalty however we are yet to see these actioned! If your trust is not registered, then this should be done sooner rather than later.

Trustees are the ones responsible for having the trust registered on the TRS if it is required. They will need to share some basic information like the trust’s name and when it was created, plus information like names, addresses, and NI numbers of all the beneficiaries and trustees, along with a rundown of the assets and their value. And do not forget—if there are any changes to the trust such as a change in trustee, new addresses etc then the trustees must update the TRS within 90 days so the most up to date information is reported on the annual declaration. We are happy to help if you have any questions.

There have been some changes to the IHT100 forms which trustees need to submit to report various chargeable events, for example the ten-year charge, death of a life tenant etc.

Previously, an IHT100 was completed alongside an event form accompanied by additional back up schedules. The IHT100 and event form have been amalgamated into one. Following changes during the covid season, these IHT forms still do not require signatures so long as all the trustees have approved them.

HMRC will continue to accept the old forms until the end of December 2024 but thereafter the new versionsmust be used.