Income Tax Act 2007 section 491

Special rates not to apply to first slice of trustees' trust rate income

Section 491 provides that the first £1,000 of trust income that would otherwise be taxed at the special trust rates is instead taxed at the normal rates applicable to that type of income.

• The first £1,000 of trustees' trust rate income is exempt from the higher trust tax rates (the dividend trust rate and the general trust rate) and is instead taxed at normal rates
• Where total trust income is £1,000 or less, none of it is subject to the special trust rates
• The composition of the £1,000 slice follows a set ordering: basic rate income first, then savings income, and finally dividend income, with each portion taxed at the normal rate for that type of income
• Gains from life assurance contracts are treated as savings income for this purpose, and any income already exempted from the special trust rates under separate provisions is excluded from the calculation