How is a trust's income taxed up to the first £1,000?

The income of a trust is taxed at the standard rate band for the initial £1,000 of income. This means that the amount up to £1,000 is subject to tax at the basic rates applicable to individuals, rather than at the higher or flat rates.

This treatment allows for a more favorable tax position for the trust on its initial income, as different trusts may have varying tax obligations based on their income levels. The intent behind this structure is to provide a measure of relief, recognizing that many smaller trusts do not derive significant income.

Taxing the first £1,000 at the standard rate band helps ensure that trusts with lower levels of income are not disproportionately burdened by higher tax rates. This should be understood as a critical element of trust taxation, which aims to balance taxation while providing some level of ease for smaller entities.