Trusts and tax: what trustees need to register, report and pay

Registering the trust

Trustees of most UK express trusts must register the trust on HMRC's Trust Registration Service, and keep the details up to date. This applies whether or not the trust owes tax. Most trusts must be registered within 90 days of being created, or within 90 days of first owing tax.

Some trusts are excluded, such as trusts holding life policies that only pay out on death and certain will trusts for up to two years after death. Changes to trustees, beneficiaries or contact details must be updated within 90 days.

Inheritance tax on trusts

Most trusts created during your lifetime are "relevant property" trusts. The transfer into the trust is a chargeable lifetime transfer:

• Entry charge. 20% on the value above your available nil-rate band of £325,000, after any annual exemptions, if the trustees pay the tax. If you pay it, the gift is grossed up and the effective rate is 25%. Further tax may be due if you die within seven years.
• Ten-year charge. On each tenth anniversary, a charge of up to 6% of the value above the nil-rate band.
• Exit charge. When assets leave the trust between anniversaries, a proportion of the ten-year rate applies.

Bare trusts are treated differently: the assets belong to the beneficiary for tax purposes. Some older interest in possession trusts, and trusts for disabled beneficiaries, also have their own rules.

Income tax

How trust income is taxed depends on the type of trust:

• Discretionary and accumulation trusts pay the trust rate of 45% on income and 39.35% on dividends in 2026/27. From 6 April 2027 the rate on savings and property income rises to 47%. Trusts with total income of £500 or less pay no income tax on it, and the £500 is shared where the same settlor made several trusts.
• Interest in possession trusts pay tax at the basic rate, or the dividend ordinary rate on dividends, and the beneficiary entitled to the income is taxed on it at their own rate, with credit for the tax paid by the trustees.
• Bare trusts are taxed as if the beneficiary owned the assets.

When discretionary trustees pay income out, the beneficiary receives it with a tax credit at the trust rate and may be able to reclaim some of it. If the settlor or their spouse can benefit from the trust, the income is taxed on the settlor instead.

Capital gains tax

Trustees have an annual exempt amount of £1,500, half the individual amount, shared between trusts made by the same settlor. Gains above it are taxed at 24%. Transfers of assets into and out of a relevant property trust can often use holdover relief, so the gain passes to the trustees or the beneficiary instead of being taxed at the time. Holdover relief is not available if the settlor, their spouse or their children under 18 can benefit from the trust.

Returns and records

Trustees of a trust with taxable income or gains file a trust and estate tax return (SA900) each year, usually by 31 January after the end of the tax year. Inheritance tax events such as ten-year anniversaries and exits are reported on form IHT100. Trustees should keep accounts showing the trust's assets, income, expenses and distributions, because beneficiaries are entitled to information about the trust.

This article is general information, not advice. Tax, financial and legal rules change and their effect depends on your circumstances. Check the current position and take professional advice before acting. Last reviewed 26 October 2026. Totus One Limited (company no. 16855798).

Andy Jackson

Head of Accountancy

Founder of Buzz Accounting, Practice Group and Founder Capital, Andy has built businesses across accountancy, fintech, private equity and e-commerce. He brings the discipline of a COO, the mindset of a founder and the connections of an investor — and a conviction that most businesses aren't broken, they're just leaking time and money.