Trusts were initially created for the noble and wealthy landowners to avoid paying Taxes to the Crown. But the introduction of Trusts led to a considerable loss of Tax Revenue, which is when the first Anti avoidance Statute was introduced in 1553.
Nowadays, you don’t have to be a wealthy landowner to take advantage of the many Tax strategies Trusts can provide. Many people could look to using Trusts as a means of mitigating Tax which could otherwise be payable. There are four types of Tax which could affect you and your estate.
This is paid by limited companies on their profits. Corporation Tax may not payable by people who are self employed, however it could apply to the following organisations even if they are not limited companies.
- Members’ clubs, Societies and Associations.
- Trade Associations.
- Housing Associations
- Groups of individuals (co-operatives) carrying on a business but not as a partnership.
There are two rates of Corporation Tax – the small companies and main rate – relate to a level of profit. If a company’s profit levels were to increase from small companies’ rate to the main rate, marginal relief could be available during the transition.
Capital Gains Tax
This is where, if you were to sell or give away an asset, it has increased in value then you may be taxable on the ‘gain’ (profit). This may not however apply when you sell personal belongings worth £6,000 or less.
You may have to pay Capital Gains if for example you:
- Sell, give away or exchange an asset or part of an asset.
- Receive money from an asset.
You may not have to pay Capital Gains on:
- Your car.
- Your main home
- ISA’s or PEP’s
- Lottery winnings
- Money which form part of your income for income Tax purposes.
This is a Tax on income, but not all income is Taxable and you are only Taxable above a certain level.
Taxable income includes:
- Earnings from employment.
- Earnings from self employment.
- Most Pension income.
- Interest on savings.
- Income from shares
- Rental income.
- Income paid to you from a Trust.
The sorts of income you don’t have to pay Tax on can include special pensions and income from Tax exempt accounts. These sorts of things are not looked at when working out how much Income Tax you might need to pay.