TSEM3023 | Trust income and gains: the charge on trustees: the tax pool - trustees pay excess tax

If the tax in the tax pool is not enough to cover the tax credit needed for the payments to beneficiaries, the trustees must pay the difference in their Trust & Estate Self Assessment Tax Return for the year. The relevant legislation is at ITA/S496.

For example, in 2024-2025 the trustees make discretionary payments from income to beneficiaries totaling £5,000.

This is treated as a net amount from which tax at the trust rate of 45% has been deducted.

The tax credit is £4,090.91 (£5,000 x100/55=£9,090.91).

If the amount in the tax pool is £2,500, the trustees have to pay a further £1,590.91 (£4,090.91 -£2,500=£1,590.91).

See TSEM3024 about how trustees can calculate the maximum discretionary payment to cover the additional tax under S496.