Trusts and the dividend tax rate

For interest in possession trusts, unless the dividends are mandated directly to the beneficiaries, they will have to start completing tax returns again from 6 April 2017.

Where an individual receives a discretionary payment from a discretionary trust the individual will not be able to claim a 0% dividend allowance on the first £5,000 of dividend income.

Also trusts will still have to ‘frank’ payments out with a tax credit of 45% whereas the maximum trust rate on dividend income is 38.1%, a shortfall of 6.9%.