Settlor Interested Vulnerable Person Trust- Income Tax


I have a client (“A”) who wishes to set up a Discretionary Trust. He has schizophrenia and receives PIP so can be classed as a trust for a vulnerable person.

This is something A has been advised to do by his social workers as, in the past, “friends” have tried to take advantage.

A wishes to transfer his property into the Trust with his mum and sister and Trustees.

A then wants to rent the property out and rent another for him to live. Ideally he wanted to sell but he has had the property on the market for some time with no interest.

I know that usually, there would be no special income tax treatment as this is a settlor interested trust.

However, what I can’t seem to find is how would the rental income be taxed? At 45% or at the settlors income tax rate?

Or would tax need to be paid at 45% initially then reclaimed?

Many thanks,


Hi Laura,

This might be of help see the first paragraph of “Trusts that qualify for special tax treatment” Trusts and taxes: Trusts for vulnerable people - GOV.UK (

The rental income would be taxed at the settlor’s marginal rate of tax.

Kind Regards
Kim Jarvis