Trusts and Income Tax

Different types of trust income have different rates of Income Tax.

Each type of trust is taxed differently. Trusts involve a ‘trustee’, ‘settlor’ and ‘beneficiary’.

Accumulation or discretionary trusts

Trustees are responsible for paying tax on income received by accumulation or discretionary trusts. The first £1,000 is taxed at the standard rate.

If the settlor has more than one trust, this £1,000 is divided by the number of trusts they have. However, if the settlor has set up 5 or more trusts, the standard rate band for each trust is £200.

The tax rates are below.

Trust income up to £1,000

Type of income Tax rate
Dividend-type income 8.75%
All other income 20%

Trust income over £1,000

Type of income Tax rate
Dividend-type income 39.35%
All other income 45%


Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.

Interest in possession trusts

The trustees are responsible for paying Income Tax at the rates below.

Type of income Income Tax rate
Dividend-type income 8.75%
All other income 20%

Sometimes the trustees ‘mandate’ income to the beneficiary. This means it goes to them directly instead of being passed through the trustees.

If this happens, the beneficiary needs to include this on their Self Assessment tax return and pay tax on it.

Bare trusts

If you’re the beneficiary of a bare trust you’re responsible for paying tax on income from it.

You need to tell HMRC about the income on a Self Assessment tax return.

If you do not usually send a tax return, you need to register for self-assessment by 5 October following the tax year you had the income.

Settlor-interested trusts

The settlor is responsible for Income Tax on these trusts, even if some of the income is not paid out to them. However, the Income Tax is paid by the trustees as they receive the income.

  1. The trustees pay Income Tax on the trust income by filling out a Trust and Estate Tax Return.

  2. They give the settlor a statement of all the income and the rates of tax charged on it.

  3. The settlor tells HMRC about the tax the trustees have paid on their behalf on a Self Assessment tax return.

The rate of Income Tax depends on what type of trust the settlor-interested trust is.

Other types of trust

There are special tax rules for parental trusts for children, trusts for vulnerable people and trusts where the trustees are not resident in the UK for tax purposes. These are called non-resident trusts.

If you’re the beneficiary

Depending on the type of trust and your income, you might be able to claim some of the Income Tax back.

If you’re the trustee

Get help completing the Trust and Estate Tax return.

If you need more help

There’s more detailed guidance on trusts and Income Tax.

Contact HMRC or get professional tax advice if you need help.