Trust Tax Calculator UK 2026

Q: How is a discretionary trust taxed in the UK?

Discretionary trusts pay income tax at the trust rate: 45% on most income and 39.35% on dividend income. There is a small standard rate band of £1,000 taxed at basic rates. Trustees also pay CGT at 20% (or 24% on residential property). Every 10 years there is a periodic charge of up to 6% of the trust value above the available nil-rate band.

Q: What is the 10-year periodic charge for trusts?

Discretionary trusts are subject to an inheritance tax charge every 10 years on the value of trust assets above the nil-rate band (£325,000). The maximum rate is 6% (30% of the IHT rate of 20%). The trustee must submit an IHT100 return and pay the charge within 6 months of the 10-year anniversary.

Q: How are trust distributions taxed?

When a discretionary trust makes a distribution to a beneficiary, income tax already paid by the trustees at 45% is available as a credit. The beneficiary may reclaim this if their tax rate is lower, or pay the difference if higher. Capital distributions to beneficiaries can trigger an exit charge, a fraction of the 10-year periodic charge rate.

Q: Can trusts avoid Inheritance Tax?

Trusts do not fully avoid IHT but can manage and defer it. Gifts into discretionary trusts are chargeable lifetime transfers (CLTs) and attract 20% IHT immediately if above the nil-rate band. The 10-year charge and exit charges apply. Some trusts such as bare trusts, disabled trusts, and bereaved minor trusts have more favourable IHT treatment.

Calculate UK trust tax for discretionary trusts and interest in possession trusts. Covers trust income tax, capital gains and the 10-year periodic charge.

Trust Tax Calculator

Trust Type

Trust Income (£ per year)

Of which: Dividend Income (£)

Capital Gains Realised (£)

Of which: Residential Property Gains (£)

Total Trust Value (£, for 10-year charge)

Years Since Settlement / Last 10-year ChargeEnter 10 to calculate the full 10-year periodic charge

UK Trust Tax Rates and Rules 2026

Trusts are a popular estate planning tool but they come with their own complex tax regime covering income tax, capital gains tax, and inheritance tax. Understanding how each charge applies is essential for effective planning.

Discretionary Trust Tax Rates

Income Type	Standard Rate Band (£1,000)	Above Standard Rate Band
Non-dividend income (savings, rental, etc.)	20%	45% (trust rate)
Dividend income	8.75%	39.35% (dividend trust rate)
Capital Gains (non-property)	20% (after £3,000 annual exempt)
Capital Gains (residential property)	24% (after annual exempt)

The 10-Year Periodic Charge

Every 10 years, a discretionary trust is subject to an IHT charge. The maximum rate is 6% (30% of the 20% lifetime IHT rate) applied to the value of trust assets above the nil-rate band (£325,000). Trustees must report and pay using form IHT100 within 6 months of the anniversary date.

Interest in Possession Trusts

In an Interest in Possession (IIP) trust, a named beneficiary (the life tenant) has the right to receive trust income. The assets are treated as part of the life tenant’s estate for IHT purposes. Income is taxed at the life tenant’s personal rates, with basic rate tax collected by trustees and credited against the life tenant’s liability.

Frequently Asked Questions — Trust Tax

How is a discretionary trust taxed in the UK?

Discretionary trusts pay income tax at the trust rate of 45% on most income (39.35% on dividends) above a £1,000 standard rate band. Capital gains are taxed at 20% or 24% on residential property. Every 10 years there is a periodic IHT charge of up to 6% of assets above the nil-rate band.

What is the trust rate of income tax in 2026?

The trust rate for 2026/27 is 45% on savings and other income, and 39.35% on dividend income. There is a £1,000 standard rate band within which trust income is taxed at 20% (or 8.75% on dividends). Above this the full trust rates apply.

What is the 10-year periodic charge for trusts?

Every 10 years, a discretionary trust pays IHT on assets above the nil-rate band (£325,000) at a maximum rate of 6%. Trustees must file an IHT100 return and pay the charge within 6 months of the anniversary. Exit charges also apply when assets leave the trust between 10-year anniversaries.

How are trust distributions taxed?

When a discretionary trust makes an income distribution, the beneficiary receives a tax credit for the 45% tax already paid by trustees. If the beneficiary is a basic rate taxpayer they can reclaim the difference. Capital distributions can trigger exit charges — fractions of the 10-year periodic charge based on complete quarters elapsed.

Can trusts avoid Inheritance Tax?

Trusts do not fully avoid IHT. Gifts into discretionary trusts are Chargeable Lifetime Transfers (CLTs) and attract 20% IHT immediately if above the NRB. The 10-year periodic charge and exit charges then apply. Bare trusts, disabled trusts, and bereaved minor trusts have more favourable treatment and may avoid the periodic charge.