From 6 April 2024, HMRC abolished the default standard rate band (£1,000) for income tax on trusts and estates.

Instead HMRC have introduced a £500 tax free amount on which UK trusts and estates do not pay income tax, providing total income does not exceed £500. If income exceeds £500, tax is payable on the full amount, not just the excess.

The full amount will not be applicable if the settlor has more than one trust; the £500 tax-free limit is divided by the number of accumulation or discretionary trusts they have (noted in Q9B.1 on page 5).

The £500 tax free amount does not apply to unauthorised unit trusts or bare trusts (if Q8.4 has been ticked within the return). There are exceptions to this, when certain income is taxed at the trust rates within the return.

TaxCalc provides the tax free amount automatically based on the type of trust and income types/amount. The system is following HMRC methodology and the calculations are validated upon online filing. For this reason, there is not an option to manually override the calculation.