45% rate on Trusts

Anyone seen anything official to confirm my assumption that this rate will drop to 40%? Nothing on the Treasury website, so far as I can see?



As far as I can see all the Government has said is at 3.23 of the main document " [it] will reverse the 1.25 percentage point increase in dividend tax rates from April 2023". This was omitted from the Income Tax Fact Sheet, though this does say that the dividend additional rate will be “removed” as well as “removing” the additional rate of income tax.

The trust rate and dividend trust rates are imposed by s9 ITA 2007 and the general dividend rates by s8. Basic higher and additional rates are imposed by s6 but the applicable rates are only contained in the annual Finance Acts, whereas with ss8 and 9 those Acts actually restate the currently applicable rates in ITA 2007 itself. So it is clear that the trust rate of 45% in s9(1) is most definitely not the additional rate in s6(1)(d) though it was, and was to be, 45% for tax years 2022 and 2023 per s2(1)(c) of both FA 21 and 22. This is presumably the additional rate that will be abolished per 3.22 of the document and bullet 1 of the relevant paragraph of the Fact Sheet.

The increase in rates of tax in dividend income for 2023 was enacted by s4 FA 2022 and will presumably be repealed in full, to include the dividend trust rate raise from 38.1% to 39.35% in s4(2) amending s9(2) ITA. So that rate would then revert to 38.1%.

On the evidence of what has been published so far there is neither an explicit change to the 45% trust rate nor any necessary implication, as that rate is structurally separate in the legislation and would need a change to s9(1) ITA as was done when FA 2012 imposed 45%.

The dividend trust rate has been aligned with the dividend additional rate but the abolition of the latter does not necessarily mean that it will now be aligned with the dividend upper rate which will become 32.5% in 2023.

There is no reference at all in the document or Fact Sheet to trust taxation.

Jack Harper

Input and the history lesson appreciated, Jack.