Do trusts have to pay tax or register with HMRC?

Trusts can be liable for Income Tax, Capital Gains Tax and Inheritance Tax, depending on the type of trust, its assets and the circumstances of the settlor and beneficiaries.

Inheritance Tax can sometimes arise when assets enter a trust, on certain ten-year anniversaries and when assets leave the trust. Different rules apply to different trust structures, so placing assets in trust does not automatically make them tax-free.

Many UK trusts must also be recorded through HMRC’s Trust Registration Service, including some trusts that do not currently owe tax. Certain exclusions apply, so the registration position must be checked individually.

The trustees are generally responsible for registration, record-keeping, tax returns and paying tax due from the trust. Professional tax advice may be necessary for more complicated arrangements.