We’ll guide you through the practical steps trustees must take to register, report and pay what is due. Many family trustees feel unsure about the process. We explain it in simple terms so you can protect the assets and the family’s wishes.
First, we set the scene: what this form of tax covers and why the right route depends on the type of arrangement and any chargeable events. Then we show the journey you will follow — registration on the TRS, getting a UTR, completing the SA900 return and how to pay by bank transfer, direct debit or cheque.
We keep things practical. With a clear checklist and good records you can meet deadlines and avoid penalties. For full trustee duties see the government guidance on trustees’ responsibilities.
Key Takeaways
- Register liable arrangements on the TRS and keep records.
- Work out income and gains, then file SA900 if required.
- Use accepted methods to pay any amount due on time.
- Nominate a lead trustee to manage returns and correspondence.
- Deadlines matter — missing them can cause penalties and stress.
Understanding what “trust tax” means for UK trustees
Let’s break down the basics so you can see who does what and why the paperwork matters.
How the arrangement works: settlor, trustees, beneficiary and trust assets
The settlor transfers property or savings and sets the rules in a deed. Trustees then hold and manage the trust assets for the people named to benefit.
Beneficiary rights depend on the deed. The document tells trustees how to use income and capital.
Which levies can apply
Three main charges commonly affect these arrangements.
- Income tax on interest, rent or dividends.
- Capital Gains Tax on disposals of property or investments.
- Inheritance tax on certain creation or periodic events.
Why official oversight matters
Registration and ongoing reporting help with compliance and transparency. A clear routine for records makes the process routine and less stressful.
Some responsibilities sit with trustees, while in other cases a beneficiary may be liable. Knowing who answers for what avoids surprises.
| Charge | Who usually pays | When it applies | Typical form |
|---|---|---|---|
| Income tax | Trustees (or beneficiary if income is paid out) | When trust earns interest, rent or dividends | Self Assessment / trust return |
| Capital Gains Tax | Trustees | On disposal of trust assets such as property or shares | CGT calculation on return |
| Inheritance tax | Depends on event — settlor or trustees | On creation, ten-year charges or exit events | Reporting via trust forms |
Identify your trust type before you calculate or pay anything
Start by confirming what kind of arrangement you are dealing with.
Why this matters: the arrangement type decides who pays, which rates apply and which forms you must file.
For a bare trust the legal holders manage assets, but the beneficiary is treated as the owner for income and gains. That usually means the beneficiary reports income on their own return.
In interest possession cases an income right sits with a life tenant. The life tenant pays tax on income as it arises, even if trustees pass the cash along later.
Discretionary trust arrangements give trustees choice over distributions. Beneficiaries do not hold an automatic claim. Retained income often faces higher rates and such discretionary setups can be within the relevant property rules for IHT, with entry, periodic and exit charges.
- Check the deed first. Confirm the exact type before you calculate income or capital gains.
- Note who the named beneficiary is and whether they have possession of income.
- If uncertain, seek professional advice early to avoid mistakes.
| Arrangement | Who is usually liable | When it applies |
|---|---|---|
| Bare trust | Named beneficiary | When assets are held for a specific person |
| Interest in possession | Life tenant (income recipient) | Where someone has an immediate right to income |
| Discretionary | Trustees (on retained income) | When trustees decide distributions; may face periodic charges |
For practical steps on accessing a beneficiary’s share, see our guide on how to access a trust fund.
Register the trust with HMRC using the Trust Registration Service (TRS)
Registration on the TRS is the practical first step every trustee should complete.
Most UK express trusts must be listed on the TRS, often even when there is no immediate liability. This requirement comes under the Money Laundering Regulations and gives officials clear information about who controls and benefits from assets.
New arrangements created on or after 1 September 2022 must be registered within 90 days. Trustees must also update the record within 90 days after changes to beneficial ownership or other key details.
- Gather names and contact details for trustees, beneficiaries and the settlor.
- Have core facts from the trust deed and the type of arrangement ready.
- Note who controls the assets and any declared beneficial ownership.
Common triggers for an update include a trustee resigning, a beneficiary being added, or a shift in who controls the funds.
“Treat TRS as ongoing admin, not a one‑off chore.”
| Action | Deadline | Why it matters |
|---|---|---|
| Register new trust | 90 days | Ensures legal visibility |
| Update details | 90 days | Keeps records accurate |
| Review annually | Each year | Prevents last‑minute problems |
Get the trust’s UTR and set up access for filing and payments
A clear UTR and the right access make filing and payments far less stressful for trustees.
What a UTR does: it links the arrangement to returns and due sums for each tax year. HMRC uses this number to match forms, correspondence and any money owed.
If you don’t have the UTR you cannot smoothly submit the Trust and Estate tax return or manage the online account. That leads to delays and extra work when questions arise.
- Set up online services and nominate trustee authorisations.
- Keep a clear folder with meeting notes, distribution decisions and income backups.
- Record who can file and who can authorise payments to avoid confusion.
Good admin saves cash. If we can see what is due and when, we plan distributions without draining the available funds. Strong records also protect beneficiaries by cutting delays and mistakes.
“A tidy UTR file makes every year easier to handle.”
Work out the income tax due on trust income for the current tax year
Begin by gathering all receipts and statements so you can separate income types clearly.
Capture every stream: bank interest, dividends, rental income and other investment income. Include small one‑off receipts and regular interest. That prevents missed entries when you file later.
How rates differ. For 2024/25 we apply different rates by arrangement type. Interest in possession pays 20% on non‑dividend income and 8.75% on dividend‑type income. Discretionary arrangements pay 45% on non‑dividend income and 39.35% on dividend‑type income.
| Arrangement | Non‑dividend rate | Dividend rate |
|---|---|---|
| Interest in possession | 20% | 8.75% |
| Discretionary trust | 45% | 39.35% |
Allowance rules. There is a £500 trust income allowance. If total income exceeds £500, all income is taxed — not just the excess. For multiple discretionary trusts from the same settlor the allowance is split, with a minimum £100 per trust.
Common pitfalls include mixing dividend and non‑dividend figures and assuming the individual dividend allowance applies — it does not for these arrangements. Also watch for disallowances on certain expenses.
Example: a family arrangement earns £2,000 rental income and £300 dividends. The rental is taxed at the non‑dividend rate for the arrangement. Dividends use the dividend rate. Keep the working papers so you can show how each sum was treated on the SA900.
Keep calculations and statements. Clear records support the return and make distributions simpler for the trustees and beneficiaries later.
Complete and submit the Trust and Estate Tax Return (SA900)
Filing the SA900 need not be a scramble if we prepare figures in good time.
What to report: the form asks trustees to list income, gains, allowable deductions and distributions made in the year. You must show how each figure was calculated and attach evidence where needed.
Our recommended order is simple. First calculate totals for income and gains. Then complete the return. Finally, arrange any sum due before the deadline.
- Paper deadline: 31 October following the tax year.
- Online deadline: 31 January following the tax year.
Don’t leave filing to the final week of January. Missing certificates or bank statements can delay a return and risk penalties. Good records make the process quicker and cut the chance of queries.
| Step | Action | Why it matters |
|---|---|---|
| Calculate | Gather income, gains and deductions | Accurate figures reduce queries |
| File | Complete SA900 by the correct deadline | Avoid late filing penalties |
| Confirm | Ensure distributions match the deed | Shows returns reflect what trustees actually did |
Once you understand what the SA900 covers, it becomes a repeatable annual routine.
Make your trust fund tax payment hmrc: deadlines and payment methods
When the SA900 is complete, we move to the practical act of arranging funds and choosing how to pay what’s owed. HMRC will confirm any unpaid figure by 31 January for the year and give a clear due date.
Accepted methods are straightforward. You can use a bank transfer, set up a direct debit, or pay by cheque. For busy trustees, a bank transfer is usually the quickest and easiest.
Practical tip: ring‑fence the amount shown before you make discretionary distributions. That protects beneficiaries and avoids shortfalls that force last‑minute asset sales.
- File SA900, wait for HMRC confirmation by 31 January.
- Reserve the indicated funds in the trust account.
- Choose bank transfer, direct debit or cheque and pay by the due date.
| Method | When it helps | Note |
|---|---|---|
| Bank transfer | Immediate | Best for tight deadlines |
| Direct debit | Recurring years | Good for regular cashflow |
| Cheque | No online access | Allow posting time |
Late settling attracts interest and possible penalties. We recommend a simple reminder system around the year to keep the arrangement stable and avoid rushed decisions.
Issue beneficiary paperwork when you make distributions
Giving someone their share is only one step — proper paperwork matters next.
When trustees make distributions they must give each beneficiary a statement. The correct form is R185 (trust). This shows how much income each beneficiary received and what tax the arrangement has already paid.
Why this matters: beneficiaries use the R185 to complete their own returns. Clear figures stop double charging and reduce later disputes.
What R185 includes:
- Beneficiary name and reference.
- Amount of distribution and the share of trust income.
- The tax suffered before distribution and any available tax credit.
Discretionary arrangements often carry a tax credit. That credit reflects tax trustees paid before they passed income on. We must explain the credit in plain terms when we give the form.
| Item on R185 | Why it helps the beneficiary | Action for trustees |
|---|---|---|
| Amount distributed | Shows what to report as income | Provide a clear figure and date |
| Tax suffered / credit | Prevents double taxation | Show calculation and supporting notes |
| Share of trust income | Matches entries on personal return | Issue one form per beneficiary |
Simple example: if £900 of trust income is split three ways, each beneficiary gets R185 showing £300 and any tax credit. We keep copies and dates. Beneficiaries may ask months later when they do their own return.
Keep an organised file and give beneficiaries their R185 promptly. A tidy record reduces queries and keeps family conversations calm.
How discretionary arrangements can affect inheritance
Handle Inheritance Tax events for trusts, including discretionary trust charges
Event-driven inheritance liabilities can be complex; we simplify the key moments that matter to trustees.
Entry charge on creation. When a settlor makes a Chargeable Lifetime Transfer (CLT), any amount over the available nil‑rate band faces a 20% lifetime rate on the excess. For IHT rules, that immediate charge protects the estate from later surprises.
Example: a £400,000 gift with a £325,000 nil‑rate band creates a £75,000 excess. At 20% that yields a £15,000 initial charge. If the settlor dies within seven years, the liability may be recalculated up to 40%, with taper relief reducing the extra bill depending on years survived. Trustees are usually asked to meet the shortfall.
Periodic and exit charges. Relevant property arrangements face ten‑year periodic charges based on the trust value at each anniversary. Capital leaving before the first ten years often carries a different exit calculation than distributions after the first decade.
Timing matters. IHT liabilities are normally due six months after the end of the month of the event and reported on form IHT100. There are key exceptions: no exit charge if capital is distributed within three months of setup, and under a discretionary will arrangement no exit charge if distributed within two years of death.
For practical guidance on protecting family assets and meeting reporting duties, see our secure your family’s future page.
Stay compliant year-round: records, updates and avoiding penalties
A year-round routine for bookkeeping and updates prevents last-minute panic and penalties. We recommend simple habits that keep trustees confident and beneficiaries protected.
- Bank statements and transaction logs for trust accounts.
- Dividend vouchers, rental summaries and interest statements.
- Receipts for expenses and professional fees.
- Valuations for property or investments and disposal records.
- A dated log of trustee decisions and distribution minutes.
Clear records reduce mistakes when we complete the SA900 and other returns. They also make it easier to explain decisions to beneficiaries.
Update the TRS within 90 days of any change to trustees, beneficiaries or beneficial ownership. Keeping that register current is a live duty, not a one‑off task.
Know the applicable rates and when they change. Correct rates stop underpayments and avoid letters and penalties. Complex events — multiple trusts from one settlor, mixed sources of income, property disposals or IHT periodic calculations — raise the odds of tricky rulings.
If you’re unsure, seek professional advice early. Good guidance helps protect trust assets and ensures the intended benefit reaches the family. For an overview of possible penalties and how advisers should act, see penalties guidance for agents and advisers.
Conclusion
We close by giving a clear, one‑page route you can follow each year.
Register or update on the TRS within 90 days, get the UTR, and calculate 2024/25 income correctly. File the SA900 by the online deadline and settle any amount due via an approved method.
Simple annual rhythm: calculate income, file the return, pay what is due, then issue R185s and keep records.
Sanity check example one: a discretionary arrangement faces higher rates, so reserve cash before distributions. Sanity check example two: an interest in possession arrangement treats the life tenant as the income recipient.
Final note: trustees need a clear process, not specialist status. Ask for help when calculations get complex and keep the method simple.