Income Tax (Trading and Other Income) Act 2005 section 665

Assumed income entitlement

Section 665 explains how to determine whether a beneficiary with an absolute interest in the whole or part of the residue of an estate has an "assumed income entitlement" for a given tax year, and how to calculate the amount of that entitlement.

• The beneficiary's cumulative share of residuary estate income is calculated for the current and all previous tax years during which they held the interest, with income tax deducted at the applicable rate for any year in which the estate qualifies as a UK estate.
• The cumulative net figure is then compared against the total of all basic amounts of estate income on which the beneficiary was chargeable to income tax in previous tax years.
• If the cumulative net share exceeds the total of those previous basic amounts, the beneficiary has an assumed income entitlement equal to the difference — in practice, where income is received each year as it arises, this broadly equals that year's share of residuary income.
• The calculation is subject to special rules for successive absolute interests and for cases where an absolute interest follows a limited interest in the same estate.