To think that it's time tax exemption for trust funds ended?

Trustees pay income tax on their income annually. They also pay capital gains tax on any disposals. In this respect they are essentially taxed in the same manner as individuals, except they do not have a personal allowance and have a lower annual exempt amount, and depending on the type of trust they are taxed at either advanced or basic rates.

If any income is distributed to a beneficiary, that beneficiary also pays income tax. They can have a tax credit for any tax already paid by the trustees so the same income is not taxed twice.

If capital is distributed out of the trust to a beneficiary, inheritance tax is charged.

Trustees also pay inheritance tax every ten years on the total value of their assets.

It’s not his money is the short answer. He is taxed on what he receives.

No what? No “trusts shouldn’t be exempt from iht”? They’re not.

how would you simplify the tax system?

Tell us that you know nothing about trusts and how they are taxed. Hang on, you have just done it.

I confess I don’t know much about trust tax law. However I sympathise with the OP’s point which is surely more broadly about wealth taxes. I think the key is the sheer scale. The Duke of Westminster or whoever he is, is one of the richest people in Britain. He or his family trust own swathes of land and property in London. That’s very different from keeping a marginal hill farm together or making sure generational wealth doesn’t get bought up by big development companies.

I think it must be complex deciding where to draw the line, and I wouldn’t want to see big houses and estates broken up as they weee so often post WW2. However there is a massive fairness issue here: this person must be in the top 1% if not 0.1% and there must be a way to tax some of that wealth back into the Treasury. We are all thinking about tax and budgets coming up to the election and those most able to pay should shoulder the burden.

(I’ve been a higher rate tax payer most of my life and whilst it’s eye watering I’m also glad it goes to pay for public services.)

You don’t seem to understand the situation or the law though. So I think the comment is fair enough

No.

But I would radically simplify the entire tax system. It's monstrously complicated, allowing clever advisers to dream up ever more complicated tax avoidance schemes which tie government up in knots and waste resources while being very expensive for businesses.

The Duke of Westminster doesn’t- he pays income tax like everyone else. The trust pays a tax charge every 10 years on its assets.

Trust funds are not “exempt from tax”. Tax is due on many types of trusts. You don’t pay iht if you don’t inherit any assets.

Tax is very complex but it’s not at all correct that it’s easy to avoid by putting assets in a trust.

Gawd, another 'let's bash those with money' thread

I'm going to assume OP isn't coming back since it's clear she is grossly misinformed on tax law concerning trusts, but for anyone interested it's worth noting that since 2006 trusts have essentially lost all of their inheritance tax advantages. There are still a large number of legacy trusts (or QIIPs, if you're interested) in existence which can benefit from the old inheritance tax reliefs, but these are becoming increasingly rare and will eventually die off as their beneficiaries pass away.

That said, there are and always have been incentives other than tax advantages to open trusts, so we still see a lot of trusts being created today.

If parents die and the kids are little what do you think should happen to the money the parents had?
A - give it to the government in tax
B - give to SiL / Best Friend / Granny - and hope it gets spent on the kids and not lost, or mis-spent or lost and that there is enough left for them when they need it.
C held in legal trust to ensure that the kids benefit from it and the money is looked after for them until they are old enough.

Hmmm - tricky.

You really need to work on your bedside manner. Have a nice evening.

@VolvoFan sometimes intelligent people say stupid things. (Although sometimes it does transpire that the person saying the unintelligent thing was unintelligent themselves.)

Don't be silly. The comment came from me, who else could you possibly be belittling? I support a 'regime' that will never see the light of day, which is to ensure that any wealth earned, inherited or gifted is not subject to redistribution by the State.

There won't be any major "assault" on trusts.

What is genuinely surprising, though, is that the reparations-supporting activists haven't come after them loudly. Particularly as there are still very traceable sugar fortunes (say), wrapped up in trusts.

I was expecting it the last few years but nothing has hit the mainstream. I think the caravan has moved on.

Belittling someone you disagree with by bringing their intelligence into question is very much indicative of envy. The fact of the matter is you don't like people who are worth more than you (they inherited family wealth that they can't spend). It's tiresome. It must be exhausting to be this way, day in, day out.

I was belittling the intelligence of the comment. I thought surely "blah blah, politics of envy" really isn't the most incisive thing any given person could have to say in the subject.

But you've just made a load of wild assumptions and then followed up with "you're jealous" again, so I don't know.

I did try asking you why you supported the system.

There are other ways to raise revenue without a blanket assault on trusts.

You could add National Insurance to investment income, equalise capital gains, a wealth tax etc.

Belittling someone you disagree with by bringing their intelligence into question is very much indicative of envy. The fact of the matter is you don't like people who are worth more than you (they inherited family wealth that they can't spend). It's tiresome. It must be exhausting to be this way, day in, day out.

Thanks both

Yes it's basically a perpetual 6% tax every ten years on trusts

Yes this is correct, assuming that the assets are not distributed.

If they are distributed out of the trust, something called a proportionate (or exit) charge kicks in, which means IHT is charged on any assets that leave the trust.

Is that your most intelligent comment on the subject? Taxation policy is a public policy like everything else. I'm sure you can manage something more substantive to defend the regime if you support it.

Sorry sent too soon...surely if someone dies then it continues in trust to someone else and they continue paying the 6%, is that right?

I think the time in which Labour would go after reforming trust law or tax arrangements has passed, and the Conservatives won't. So we are stuck with it, I think. They say we are sliding back into Victorian levels of wealth inequality anyway, so it fits.