Tax Examples

Real case example of the effective use of a Trust Declaration to save tax.

The following is a real case example how to use a Trust Declaration to save tax.
Finance changes with typical earnings, one rental property and Trust Declaration.

Tax Example:

Assume the following based on the figures for tax year 2019-20

  • Personal allowance of £12500
  • Higher 40% tax band starts at £50000

Background information for rental business:

Salary                                                                     £48000

Rental income from one property                   £8500

Other expenditure costs                                    £1500

Profit without deducting finance costs           £7000 (real profit £2500 prior to changes)

Finance costs                                                        £4500

Total income without deducting finance costs       £55000


The tax payable to HMRC on the rental income for tax years 2019-20 and 2020-21 is shown below

2019-20  £1275

2020-21  £1500 

Notes – Trust Declaration to save tax

(a) The total income of £55000 for tax year 2020-21 will be £5000 above the £50000 child benefit threshold. The benefit is reduced by 1% for each £100 above the threshold and therefore the reduction for £5000 is 50%.

(b) A Trust Declaration was supplied by Tax Landlord Ltd at the start of the 2019-20 tax year. The spouse income was only £5500 a year and by utilising the Trust Declaration to apportion the full 100% rental income reduced the tax to zero and remains the same in 2020-21.

(c) Based on the same figures if a spouse, partner or family member earns less than £43000, but above the personal allowance of £12500, by utilising a Trust Declaration to apportion the full 100% rental income to that person reduces the tax to just £500 per year and remains the same amount for 2020-21. The savings are £775 for 2019-20  and £1000 for 2020-21 and the following years.

(d) If a spouse, partner or family member has no income or any income up to £10000, using the same figures, and by utilising a Trust Declaration to apportion the full 100% rental income to that person, reduces the tax to zero for 2019-20 and remains the same for 2020-21.

Important – Trust Declaration to save tax

Please examine your income and rental profits and try and determine whether a Trust Declaration may be suitable. I am happy to advise based on your personal circumstances. The cost of a Trust Declaration is just £39 which includes advice on completing the documentation and the additional service of any later guidance and clarification on any issues concerning its application.