What do I need to declare from trust on self assessment?

[MB74]

Hi, I took out an investment bond for my children in 2006. It was £10,000 which was left to them in a will as inheritance from a relative. I have now cashed it in fully for £17,000. I am listed as settlor. I am a higher rate tax payer so wanted to know do I need to do any self assessment or other forms declaring the gain of £7,000 or is that below the threshold or does fact it funded by an inheritance mean it is covered? Any advice greatly appreciated as have read quite a bit on it and still unsure, Thanks

[bd6759]

That’s a disappointing return. It’s simply matched inflation.

If the money was left to your children, you are not the settlor? It’s always been your children’s money, so you are the trustee.

[MB74]

Thanks, it is indeed disappointing and when I try to add to self assessment online says I would be liable for some £2,500 in tax. On chargeable event certificate it only has myself and one other as trustees (financial adviser did this all some years ago). It says amount of gain grounded down is £7,130 and the amount of tax treated as paid rounded up is £1,427. It does not list the children as beneficiaries though their names were on original legal and general policy. I would only be doing self assessment so the trust income was declared but if I don’t need too in the circumstances that would be best outcome.

[bd6759]

If you are not the settlor(that means you did not give the money to your children), the money, and therefore the gains, belong to your children.

If there were a tax liability, they would need to declare it. But unless they have a vast amount of other income to take them into the higher rate bracket, there is no additional tax liability and nothing for them to notify.

[MB74]

I was the settlor so does that mean I am liable?

[AGoodman]

If the money was left direct to your children by your relative, and you used their money to buy an investment bond for them, then it is extremely difficult to see how you could be the settlor. The broker/insurer may have thought that, and there may even be documents naming you, but it is not the case as the money was never yours.

[MB74]

Thanks for your help. I closed the trust when the money was given to my children so I guess HMRC would contact me if think needs a return