The taxation of trusts in the United Kingdom is governed by a different set of principles to those tax laws which apply to individuals or companies.
The inheritance tax ("IHT") treatment of trusts was substantially revised by the Finance Act 2006, with effect from 22 March 2006.
The possible types of trust which can now exist for inheritance tax purposes are set out in the table below: Notes: Relevant property trusts are taxed:[1] The interest-in-possession treatment, since 2006, applies only to some trusts with an interest-in-possession (as defined above).
Where it applies, such trusts are taxed by attributing the trust's value to the beneficiary who is currently entitled to the income.
Accordingly: