Tax reporting for low income trusts and estates

From 6 April 2024, all trusts and estates with any type of income up to £500 do not require a tax return. If income exceeds this amount a return will be required on all income (not just any amount over the £500 threshold). However, if you have settled more than one trust, the £500 limit will be apportioned across each trust.  The minimum limit per trust is £100. For example, if you have settled 4 trusts, the threshold for formally reporting income would be £125 per trust.

However, if any of the discretionary income is distributed, it’ll be treated as though it’s been paid net of trust rate tax of 45%. Therefore, a calculation of the tax payable on any income distributed will still be required to ensure the tax credit has been funded.

Beneficiaries of UK estates will no longer pay tax on income distributions from the estate if the total estate income is below £500.  

By raising the income threshold and simplifying the tax treatment of discretionary income distributions, these changes should lead to a reduction in administration work and costs for low income trusts and estates

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