Beware of tax on income-producing trusts - Standard

Julie Hutchinson, head of estate planning of Standard Life, said the Budget had created significant changes for trusts.

In the pre-Budget report in November last year the government announced tax on income in income-producing trusts would increase from 40 per cent to 45 per cent and this change would be implemented in 2011.

In the recent Budget the government decided to increase the tax to 50 per cent and implement the increased charges a year earlier than originally planned.

Ms Hutchinson said these changes could affect the 116,000 people in income-producing trusts and they would have to seek advice before the changes came in next April.

She said: "There is going to be more tax paid in trusts, which means that less will go to the beneficiaries. Investment bonds have become more attractive as a result of the Budget as a trustee investment as it is a non-income asset.

"This is an opportunity for advisers to contact trustees and clients."

Colin Parkin, director of Lincoln-based IFA Ample Financial Services, said it was difficult to advise clients because the government had a history of changing its mind.

He said: "We recently started a campaign on this issue about two weeks ago because a lot of trusts have to be redone. We are currently contacting our clients about their trusts to do reviews, it does not mean we will do anything.

"It is a big issue if you act on it now and the legislation is not finalised and the changes are going to get you into trouble."