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Are all dividends received via a trust taxable?

Is a life tenant eligible for the nil rate band on dividends received via a trust?

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A new client is the life tenant of a trust. Most of the trust income is rent but there is some element of dividend income (a lot less than £5,000).

The trustees are deducting tax at 20% from all the income including dividends and paying it over to HMRC.

The previous accountant have entered all the income from the trust as trust income o the tax return and it has all been taxed - with no nil rate band for dividends.

Is this correct? Is there a better way to do it - ie making use of the nil rate dividend band?

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By cathygrimmer
31st Aug 2018 13:59

The trustees shouldn't be deducting 20% tax from dividends - for an IIP trust it is 7.5%. I suggest your client approaches the trustees about this. The dividend allowance is available against this dividends income so your client can claim a refund. If the dividend income was mandated to the beneficiary, no tax deduction would be necessary.
Cathy

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By Joe Soap
02nd Sep 2018 12:33

Thanks Cathy - that is what I thought but the trustee is HSBC and I thought that maybe, just maybe they would know what they were doing.

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By cathygrimmer
03rd Sep 2018 09:46

Are you sure they are straightforward dividends? Could they be Property Income Dividends? I would have thought HSBC would know what they were doing too! Probably best to ask for clarification.
Cathy

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By nick farrow
31st Aug 2018 16:41

thanks Cathy funny enough I was going to ask you a v similar question

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Replying to nick farrow:
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By cathygrimmer
03rd Sep 2018 09:46

Well you got the answer for free this time!
Cathy

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