Payment of income and capital gains tax

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

Tax is collected in a number of ways. These are:

•
collection at source throughout the year
•
payments on account calculated by reference to the tax due for the previous tax year
•
balancing payments for the tax year (tax liability less tax already deducted at source or paid on account)

Payments on account ― income tax

Payments on account are required where:

•
the amount payable at the end of the previous year was more than £1,000, and
•
the amount collected at source was less than 80% of the total tax liability

TMA 1970, s 59A(1); SI 1996/1654

Each payment on account is 50% of the previous tax year’s tax liability, less the tax collected at source.

Payments on account do not cover capital gains tax since this is a transactional tax and cannot be assumed to remain at the same level year on year; whereas it is a reasonable assumption that income levels will remain static.

Basically, if over 20% of the trustees’

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