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If you鈥檙e a trust beneficiary there are different rules depending on the type of trust. You might have to pay tax through Self Assessment or you might be entitled to a tax refund.

If you do not usually send a tax return and need to, you must by 5 October following the tax year you had the income.

If you鈥檙e the beneficiary of a bare trust you are responsible for declaring and paying tax on its income. Do this on a Self Assessment tax return.

If you do not usually send a tax return and need to, you must by 5 October following the tax year you had the income.

Interest in possession trusts

If you鈥檙e the beneficiary of this type of trust, you鈥檙e entitled to its income (after expenses) as it arises.

If you ask for a statement, the trustees must tell you:

• the different sources of income
• how much income you鈥檝e been given
• how much tax has been paid on the income

You鈥檒l usually get income sent through the trustees, but they might pass it to you directly without paying tax first. If this happens you need to include it on your Self Assessment tax return.

If you do not usually send a tax return you must by 5 October the year after you were given the income.

Example

If you鈥檙e a basic rate taxpayer

You will not owe any extra tax. You鈥檒l still need to complete a Self Assessment tax return to show the income you receive from an interest in possession trust but you will get a credit for the tax paid by the trustees. This means the income is not taxed twice.

If you鈥檙e a higher rate taxpayer

You鈥檒l have to pay extra tax on the difference between what tax the trustees have paid and what you, as a higher rate taxpayer, are liable for. This will be calculated when you do your Self Assessment.

How to reclaim tax

You can reclaim tax paid on:

• dividends (if you鈥檙e entitled to dividend allowance)
• savings interest (if you鈥檙e entitled to personal savings allowance)
• trade and property income (if you鈥檙e entitled to trading allowance or property allowance)

The allowance amount will be reduced if it鈥檚 already been used against some income. The allowance you have left is called the 鈥榓vailable allowance鈥�.

If the amount of income you receive is less than or equal to the available allowance, you can reclaim all of the tax paid.

If the amount of income you receive is more than the available allowance, you can only claim the tax paid on the available allowance.

If you鈥檙e a Self Assessment taxpayer the repayment will be calculated as part of your return.

If you鈥檙e not a Self Assessment taxpayer you can reclaim the tax using form R40.

You need to make a separate claim for each tax year.

Accumulation or discretionary trusts

With these trusts all income received by beneficiaries is treated as though it has already been taxed at 45%. If you鈥檙e an additional rate taxpayer there will be no more tax to pay.

You may be able to claim tax back on trust income you鈥檝e received if any of the following apply:

• you鈥檙e a non-taxpayer
• you pay tax at the basic rate of 20%
• you pay tax at the higher rate of 40%

You can reclaim the tax paid using form R40. If you complete a tax return, you can claim through Self Assessment.

Settlor-interested discretionary trusts

If a settlor-interested trust is a discretionary trust, payments made to the settlor鈥檚 spouse or civil partner are treated as though they鈥檝e already been taxed at 45%. There鈥檚 no more tax to pay. However, unlike payments made from other types of trusts, the tax credit cannot be claimed back.

Non-resident trusts

This is a trust where the trustees are not resident in the UK for tax purposes. The tax rules for this type of trust are very complicated - there鈥檚 detailed guidance on non-resident trusts.

If a pension scheme pays into a trust

When a pension scheme pays a taxable lump sum into a trust after the pension holder dies, the payment is taxed at 45%.

If you鈥檙e a beneficiary and receive a payment funded by this lump sum, you鈥檒l also be taxed.

You can claim back tax paid on the original lump sum - do this on your Self Assessment tax return if you complete one, or using form R40.

The trust will tell you the amount you need to report - this will normally be more than the amount you actually receive.