Distribution of Trust assets (Offshore Bond) - taxation for higher rate tax payers
I think I just have my brain in a twist over this one, but we have a case where we are weighing up whether to encash segments in an offshore and get the Trustees to pay the 45% tax, or, assign segments out and have the beneficiary pay the tax.
On the face of it, the latter would usually be the most efficient, but they already earn around £100k and the total encashment value is just over £55k - with a total gain of £15,500 - so we are looking at a loss of their Personal Allowance. (there are no other beneficiaries with less income to pay the funds to)
My question is, if the Trustees encash the segments, pay the 45% tax and then distribute the net capital to the beneficiary, does the beneficiary have to declare this money for their income tax assessment? i.e. would they still lose their Personal Allowance?