It is proposed that the trustee tax rate will increase from 33% to 39%. This change was initially indicated back in the May 2023 budget, but it is yet to become law.
Recently we have had strong indications from both the IRD and the finance minister, Nicola Willis, that this rate increase will go ahead. As the date of the proposed increase is fast approaching, we thought we should advise you of this proposed change.
From 1st April 2024 all trustee income will be taxed at the higher rate of 39%. For most trusts, this will first impact in the year ending 31st March 2025.
There are steps you can take to lessen the impact of this higher tax rate:
- If your trust owns shares in a company, we recommend reviewing the retained earnings of the company. If the company’s cashflow and ability to meet its financial obligations allow, you could declare a dividend prior to 31st March 2024.
- From 1st April 2024, trustees may also decide to distribute additional income to beneficiaries if their marginal tax rates are less than 39%.
Our team are experts in tax planning and can identify opportunities for reducing your tax obligations. As a firm-wide initiative, we are currently undergoing a review of all companies who have trust shareholders and retained earnings, and once the rate is confirmed we will be in touch to discuss if declaring a dividend is an option we recommend.
If you are aware that your trust has a shareholding in a company that we do not act for, please discuss any concerns with the directors of the company regarding this trust tax rate increase. Please get in touch if you would like us to provide guidance in these circumstances.
Please be advised the rate increase is yet to be passed into law, we are just trying to keep you informed so we can be ready to act if necessary.