Budget – settlor interested trusts

Income paid to beneficiaries from such trusts is deemed to be received by them with a notional, non refundable tax credit which covers a higher rate income tax liability. Such income is, however, held to be received before the individual's own savings income and, in circumstances, where the individual is not already a top rate taxpayer, cause a higher rate liability to arise on the individual's own savings. This unintended consequence of the 2006 rules will be removed.