A trust is a type of tax entity that is usually set up to take care of a person’s assets during their life (for example, if they are too young to handle their own affairs), or after their death.
Trusts involve three different people:
- the settlor (the person putting their assets into the trust)
- the trustee (the person managing the trust)
- the beneficiary (the person benefiting from the trust – can be the same as the settlor).
Do you pay tax if you’re the beneficiary of a trust?
- for some trusts, you might need to pay tax for the income you receive from it via a Self Assessment tax return
- for other trusts (called discretionary trusts), all income received by you is treated as though it has already been taxed at 45% – you might be entitled to a tax refund if you’re not an additional rate taxpayer (if you earn under £150,000)
- you can read more about trusts and what to do on HMRC’s guide for trust beneficiaries
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