We explain the steps trustees need. Trustees must report and settle the liability for a family arrangement that earns income or records gains. One trustee is often named the principal acting trustee and will lead on the annual filing.
In plain language, we set out a familiar example: a family fund for grandchildren’s education. We cover record keeping, the tax return and the payment stage when HMRC tells you what is due.
Our guide points out the common pitfalls that add cost. These include late filing, late payment and misunderstanding the rules for different arrangements. We keep the options simple and practical.
For readers who want background on setting up an estate vehicle, see our note on opening a trust for UK homeowners.
Key Takeaways
- Trustees carry responsibility for reporting and settlement.
- Nominate a lead trustee for liaising with HMRC.
- Keep clear records across the tax year for easier filing.
- Missing deadlines creates avoidable cost.
- Seek advice when the rules are unclear.
What trustees are responsible for when a trust has tax to pay
Trustees carry real legal duties when a fund produces income or records gains. We explain who HMRC holds accountable and what sorts of charges can arise during the tax year.
Principal acting trustee: if there are two or more trustees, name one person to handle enquiries and filings. That role helps co‑ordinate, but the other trustees remain answerable. HMRC can seek tax, interest and penalties from any trustee who fails to act.
- income tax on trust income and interest;
- capital gains tax when trust assets are disposed of;
- inheritance tax reporting and forms, for example IHT100 at certain trigger points.
Responsibility can begin after a death, when a will trust starts. Trustees must check what the estate received and what was paid out. They must keep clear records and file on time, or interest and penalties can follow.
For trustees wanting guidance about inheritance charges, see our note on avoid inheritance tax.
Confirm your trust type because it affects who pays and the tax rates
Start by confirming which type of arrangement you actually have. The type of trust drives who reports income, who meets liabilities and which tax rates apply.
Bare trust
Everyday terms: a bare trust means the beneficiary has immediate ownership. The beneficiary will usually be responsible for trust income and capital gains, even when trustees manage the assets for them.
Interest in possession
Here a life tenant holds a right to receive income. That life tenant normally carries the income burden, despite trustees making payments.
Discretionary trusts
Trustees choose who will receive income or capital. Trustees often face higher rates on trust income. When beneficiaries receive distributions, they may need to report amounts but can claim a credit for tax the trustees paid.
- Check the deed: settlor wording often fixes the type and the reporting position.
- Mistakes in type classification can cause incorrect reporting and extra costs.
- For trustee duties, see trustees’ tax responsibilities.
Registering the trust with HMRC and getting a UTR before you file
Getting the trust recorded with the Trust Registration Service (TRS) and securing a UTR usually must come first. Most express trusts in the UK must register, often even when no tax is payable straight away.
Newer trusts created on or after 1 September 2022 must be added to the TRS within 90 days. That 90‑day window is strict, and missing it can complicate later filings.
Which changes must be updated within 90 days
Trustees must keep details current. Reportable changes include new trustees, changes in beneficiary information, or amendments to key trust details that affect beneficial ownership.
- Update within 90 days: any change to trustees or beneficiaries.
- Update within 90 days: changes in settlor or in control over trust assets.
- Why this matters: TRS records should match what trustees report on returns.
Finally, trustees need a UTR before submitting a return. Treat registration and updates as protective steps. They reduce the risk of queries and help us present clear figures at the end of the year.
Work out what income and gains the trust received in the tax year
Make a complete inventory of income streams and disposals for the year. We start small and practical: list every receipt, sale and reinvestment. This simple step makes the return far easier and cuts the risk of queries.
Common sources of income
- Rent from property: include gross rent, receipts from letting agents and any repairs paid by tenants.
- Savings interest: bank and building society interest, including interest reinvested within the fund.
- Dividends: dividend vouchers and statements from investment platforms.
Tracking disposals for capital gains
Record every disposal of trust assets. That includes sales of shares, funds and property.
Keep purchase dates, acquisition costs and selling costs. These figures feed directly into any capital gains calculations and affect gains tax due.
Records checklist for HMRC
Collect and keep:
- bank statements and letting agent summaries;
- dividend vouchers and interest statements;
- investment platform reports and sale confirmations;
- purchase invoices and completion statements for property disposals.
Why this matters: accurate records reduce stress at the end tax year, speed up the return and lower the chance of delays. For detailed guidance on gains reporting see the trusts and capital gains guidance.
Income tax on trust income for 2024/25: rates, allowances and what trustees need to check
We set out the 2024/25 income rules so trustees can match rates to actual receipts. Start by separating ordinary interest and dividend‑type income. That makes calculation straightforward and avoids surprises.
Interest in possession trusts
What applies: interest in possession trusts face lower rates on many receipts. Other income is charged at 20% and dividend‑type income at 8.75%.
Discretionary trusts
What applies: discretionary trusts pay higher rates. Other income is taxed at 45% and dividend‑type income at 39.35%. Trustees often feel the bite here when distributions are not made.
The £500 trust income allowance and splitting it
Some trusts qualify for a £500 allowance. If total trust income exceeds £500, HMRC can tax the whole amount rather than just the excess. That is an important rule to watch.
Where one settlor created several trusts, the £500 allowance is divided between them. Each trust must get at least £100 of that allowance.
Practical points for trustees:
- Check each income stream against these rates.
- Do not assume the dividend allowance applies — trustees cannot claim it.
- Keep figures simple: list receipts, apply the correct rate, and note any allowance split.
Capital Gains Tax for trusts: thresholds, rates and when to report
Trustees should spot potential capital gains early so figures are ready before any sale or transfer.
Annual exempt amounts
The annual exempt amount for trusts is £1,500.
If a beneficiary is vulnerable, the exempt amount rises to £3,000. Start with the right threshold when you calculate any gains.
Rates for 2024/25
For residential property gains the rate is 24% for the year.
Non‑residential gains are taxed at 20% up to 29 October 2024 and at 24% from 30 October 2024 onwards. Apply the correct rate for the disposal date.
When gains arise and reporting points
Gains tax arises on disposals of trust assets, including sales, some transfers and certain paper reorganisations.
Gains can also crystallise when capital is distributed to a beneficiary. Trustees must check whether the distribution triggers a charge and include figures on the return.
- Gather platform sale confirmations, solicitor completion statements and purchase records.
- Apply the exempt amount, then use the correct rate for the asset and date.
- Record calculations clearly so trustees can explain figures at the year end.
How to pay trust tax to HMRC after filing your return
Once the return is filed, an official computation arrives that sets out the balance due.
We recommend reading the calculation line by line. It shows the income and gains, any reliefs claimed and the final amount you must clear. If figures do not match your records, contact HMRC promptly.
What the 31 January deadline means
The online filing date is 31 January following the end of the tax year. That date is also the standard Self Assessment payment deadline.
Missing this date can trigger interest and penalties. Even if receipts for the trust are late, trustees must plan to meet the deadline or seek an agreed arrangement with HMRC.
Practical payment options and choosing what works
Trustees commonly use these methods. Choose the one that matches your internal controls and offers a clear audit trail.
- Bank transfer (faster clearing, include the correct payment reference).
- Direct debit (useful for future instalments, requires set up).
- Cheque (still accepted, keep proof of posting and which account funded it).
| Method | Speed | Best for |
|---|---|---|
| Bank transfer | Same day to 3 days | One-off payments where reference must be precise |
| Direct debit | 3–5 days to set up | Trusts wanting regular payments or instalments |
| Cheque | 5–10 days | Trusts with strict cheque controls and paperwork |
“Keep a clear audit trail. Save confirmations and minutes showing who authorised payment.”
Simple safeguards reduce mistakes. Always use the reference HMRC gives, pay from the trust account and keep receipts. Record the decision in trustee minutes and file the evidence with trust records.
If the charge differs from your expectation, contact HMRC at once and keep a written note of the call. We suggest keeping copies of every payment confirmation for at least six years.
Completing and submitting the Trust and Estate Tax Return (SA900)
Filling in the SA900 brings together income, gains and any claims in one form. The return requires figures for trust income, any capital gains and the allowances or reliefs you seek. Be precise: errors create queries and delay final settlement.
What the SA900 covers
The form records:
- all trust income for the year;
- capital gains and gains calculations;
- tax charged or reclaimed and any claims or reliefs.
Deadlines and late filing
After the end tax year, paper SA900 must arrive by 31 October. Electronic submission via software is due by 31 January.
Late filing can trigger penalties even when little or no tax is due. Keep records and file early to avoid extra costs.
Using software or professional support
We recommend software where there are multiple income sources or complex gains. An accountant helps with tricky distributions and reduces the risk of mistakes.
“Prepare the figures before you start the form. Good records make the return straightforward.”
After paying HMRC: what trustees must give beneficiaries and update with HMRC
Clearing the bill is not the last step; trustees must next provide clear statements and update records.
We explain what trustees must issue and why it matters for each beneficiary.
Providing beneficiaries with an R185 (trust) income and tax statement
If a beneficiary asks, trustees must give a statement showing the amount of income and tax paid by the trust. The form R185 is commonly used for this.
How to handle statements when there is more than one beneficiary
When several people share distributions, each beneficiary must get figures that match their share. Give individual statements and keep copies.
| Action | Who receives it | Why it matters |
|---|---|---|
| R185 statement issued | Each beneficiary | Shows income and credit for any tax charged |
| Copy retained in records | Trustees | Proof of disclosure if queries arise |
| Split figures for multiple shares | Each person | Makes individual reporting straightforward |
Ongoing duties: updating the trust’s details online when circumstances change
Trustees must use the online service to update records when key facts change. Keep the registration accurate each year.
“Good communication reduces confusion and protects trustees if questions follow.”
Inheritance tax touchpoints trustees should not miss
Moving property or capital can trigger IHT duties even when no income appears. We flag the moments where inheritance tax becomes relevant so trustees can act early and avoid penalties.
IHT reporting may be required where assets enter or leave a trust. This includes transfers made on death and some lifetime estate planning steps. Trustees should check whether a transfer creates a chargeable transfer or needs disclosure on form IHT100 and schedules.
Periodic and exit charges
Relevant property arrangements, including many discretionary trusts, can face ten‑year periodic charges. Smaller charges may arise when capital leaves the arrangement — these are exit charges.
Both periodic and exit charges need careful calculation. Accurate valuations and dates matter for the correct charge and the right reliefs.
Practical steps for trustees
- Check paperwork: trust deed, probate, and estate schedules.
- Get valuations early: property and portfolio values must be evidence‑based.
- Use form IHT100: file promptly where required and attach schedules.
- Record decisions: minutes and valuations protect trustees and beneficiaries.
“Act early on valuation and paperwork. Missing an IHT touchpoint can be costly for the family.”
Conclusion
Keep the path simple. Confirm the arrangement type, register and keep details up to date, work out income and gains, file the return, then settle any balance by the deadline.
Good routines matter. Clear records and regular checks reduce the risk of interest, penalties and family disagreement. Trustees who act promptly protect beneficiaries and the fund.
Remember that income tax, capital gains and inheritance charges can all arise across a tax year. Use an example: a family fund for grandchildren — list receipts, record disposals, file, and keep beneficiaries informed.
If rules get complex, seek professional support. For practical guidance on accessing a fund, see access a trust fund.