When changes are made to simplify income tax for individuals there are usually knock-on effects on trusts and estates which do not seem to be fully thought through. The introduction of the Personal Savings Allowance (PSA) of £5,000 per annum for individuals to enable interest to be paid gross without tax deducted at source is such an example.
In theory, the PSA is a welcome simplification but in practice it raises the prospect of lots of small trusts with low income and estates using informal payments having to file a tax return. This is because trustees and personal representatives do not benefit from the PSA yet banks, building societies and National Savings will be paying their interest gross from April 2016.
HMRC have confirmed that for 2016/17 it will not require notification from trustees or personal representatives dealing with estates in administration where the only source of income is savings interest and the tax liability is below £100. HMRC are currently reviewing the situation longer term and will notify customers before 2017/18 tax year as to what the new arrangements might be.
Call Janice on 0131 556 4044 for more advice.