HMRC has updated the guidance about the tax-free allowance for trusts and how to report capital gains tax (CGT)
Trustees have to pay CGT if the total taxable gain is above the trust’s tax-free allowance, known as the annual exempt amount.
CGT can be payable when assets are put into a trust, assets are taken out of a trust, a beneficiary gets some or all of the assets in a trust, or when the trustees are no longer resident in the UK.
If a trust’s settlor has set up more than one trust (settlement), the tax-free allowance will be divided equally between the number of trusts, up to a maximum of five.
If there are five or more, the tax-free allowance would remain the same for each subsequent trust.
For example, in 2019 to 2020 a trusts tax-free allowance is £6,000. If a settlor has set up 2 trusts, each trust would get an equal tax-free allowance of £3,000.
If a settlor has set up five or more trusts, the exempt amount is capped at £1,200 per trust (10 or more, if for the benefit of a disabled person). Each trust would have a tax-free exemption of £1,200.
This only affects trusts set up after 7 June 1978, unless it is a trust for a disabled beneficiary, in which case it applies to trusts set up after 9 March 1981.
|Period||Tax-free allowance||Tax-free allowance if beneficiary disabled|
|6 Apr 2015 to 5 Apr 2016||£5,550||£11,100|
|6 Apr 2016 to 5 Apr 2017||£5,550||£11,100|
|6 Apr 2017 to 5 Apr 2018||£5,650||£11,300|
|6 Apr 2018 to 5 Apr 2019||£5,850||£11,700|
|6 Apr 2019 to 5 Apr 2020||£6,000||£12,000|
Trustees have to tell HMRC about any disposals the trust makes if they result in a liability in a tax year; and also of all disposals made whether they result in a gain or a loss because the trust has been issued a self assessment return unless:
- the value of the disposals exceeds the annual exempt amount by four times (£48,000 for the 2019 to 2020 tax year); and
- trustees liable to pay CGT.
The capital gains made by a trust have to be reported to HMRC by completing form SA905 Trust and Estate Capital Gains.
HMRC guidance, Trusts and capital gains tax: work out your tax: updated 3 Dec 2019