Discretionary trusts are guided by Income tax rules. This document discusses how to calculate the income tax liability on the income of discretionary trusts and any trusts where income may be accumulated. It also covers rates of tax, income belonging to other persons, income used to pay trustees’ management expenses, and the standard rate band.

Points discussed within this guidance note:

> Introduction to Discretionary Trusts

This note sets how to calculate the income tax on trusts, what tax is payable on trust income. In order to calculate the income tax liability for any trust, you first have to determine what type of trust  it  is before you can determine whether it falls into the standard rate tax or trust rate tax.

> The calculation of taxable income

This note sets out how to calculate what income tax is payable and by who and how to identify income arising for trustees of a discretionary trust. Additionally, it sets out what deductions may be available.

> Deductions from taxable income

> Rates of tax

> Income belonging to other persons

> Income used to pay trustees’ management expenses (TMEs)

> The standard rate band

> The calculation of income tax


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