Income Tax Act 2007 section 492

Cases where settlor has made more than one settlement

Section 492 reduces the £1,000 band of trust income taxed at normal rates where the settlor has created more than one settlement, to prevent settlors from multiplying the tax advantage by creating multiple trusts.

• The standard £1,000 band of trust income taxed at basic and dividend ordinary rates (rather than the trust or dividend trust rates) is divided by the total number of the settlor's current settlements
• The band cannot be reduced below a floor of £200, regardless of how many settlements the settlor has made
• Where a settlement has more than one settlor, the threshold amount is calculated separately for each settlor and the lowest resulting figure is used
• A settlement counts as "current" if it is in existence at any point during the tax year in question