Trustees must manage assets, follow tax rules, and register with HMRC where required.

A trust is a legal arrangement in which a trustee, either an individual or a company, is entrusted with managing assets such as land, money, or shares on behalf of others. These assets, placed into the trust by a settlor, are managed for the benefit of one or more beneficiaries.

Trustees are responsible for deciding how the trust's assets are to be managed, distributed, or retained for future use. They are also accountable for reporting and paying any tax due on behalf of the trust. If the trust pays or owes tax, it must be registered with HMRC.

Income received by a trust is subject to varying rates of Income Tax, depending on the type of trust.

Discretionary (or accumulation) trusts: Trustees pay tax on the trust's income. The first £500 is taxed at the standard rate. Income above this threshold is taxed at:

• 39.35% for dividend income
• 45% for all other types of income

Interest in possession trusts: Trustees are similarly responsible for paying tax on income. The rates are:

• 8.75% for dividend income
• 20% for all other income

There are additional trust structures, for example, bare trusts and settlor-interested trusts, which are subject to different rules and tax treatments. As a result, it is essential to consider both Income Tax and Capital Gains Tax (CGT) implications from the outset when establishing or managing any type of trust.

A trust is an obligation that binds a trustee, an individual or a company to deal with the trust assets, such as land, money and shares, and which form part of the trust. The person who places assets into a trust is known as a settlor and the trust is for the benefit of one or more 'beneficiaries'.

The trustees make decisions about how the assets in the trust are to be managed, transferred or held back for the future use of the beneficiaries. They are also responsible for reporting and paying tax on behalf of the trust. A trust needs to be registered with HMRC if it pays or owes tax.

Different types of trust income have different rates of Income Tax. For example, in respect of accumulation or discretionary trusts the trustees are responsible for paying tax on income received. The first £1,000 is taxed at the standard rate. For trust income over £1,000, the rate is 39.35% for dividend-type income and 45% for all other income.

With reference to interest in possession trusts, the trustees are also responsible for paying tax on income received. The rate is 8.75% for dividend-type income and 20% for all other income.

There are also different rules for bare trusts, settlor-interested trusts and other types of trusts. It is therefore important that the Income Tax rules are considered at the outset as well as the CGT implications of the various types of trusts.