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Family trusts are hit again as tax rates rise

Skandia believes changes in taxation of family trusts will make them much less attractive.

Chancellor Alistair Darling said on Monday he would be increasing the income tax rate on discretionary trusts from 40 per cent to 45 per cent without any minimum threshold, bringing them in line with the new tax rate for people who earn over £150,000 a year. He will also be raising the rate of tax payable on dividend inc- ome from 32.5 per cent to 37.5 per cent.

The new rates only apply to trusts with income over £150,000 and are to be brought in from 2011-12.

Skandia head of tax and financial planning Colin Jelley says lower-earning beneficiaries may be disadvantaged by these changes unless the trust income is paid out to them in full each year and says this is disappointing for all those who set up trusts for non-tax purposes.

Jelley says: “Where the income is distributed to the beneficiary, they will pay tax at their own marginal rate. However, those who accumulate the income will be forced to pay the 45 per cent tax.”

Threesixty partner David Ingram says: “I think that the trust market should have been allowed to settle for a bit longer before more major changes were made.”


Lottery of timing to buy annuities

If markets get back to the 5,000 level, then a large number of people should get buying an annuity “over and done with” William Burrows Annuities director Billy Burrows has urged.
Speaking at Money Marketing’s annuity round table, Burrows said that his company is investigating a number of exit strategies for people who may have seen investments suffer by as much as 15 to 20 per cent.

‘Ministers could be jailed over pensions’

Conservative Shadow Treasury Chief Secretary Philip Hammond claims if Government ministers were subject to FSA regulation they would be jailed for some of the promises they have made on pension personal accounts.


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