A trust helps you safeguard and manage your assets so your beneficiaries or chosen causes can benefit, offering you peace of mind.
We explore the process you need to follow to set up a trust and how to register it with HMRC.
What is a trust?
A trust is a way of gifting cash, a property or an investment to a beneficiary.
A trustee manages the trust on behalf of the beneficiary until a specified time.
Trusts also let you determine how your assets are used after your death.
A trust may be set up to protect family wealth or when someone is too young or unable to handle their own affairs.
There are three roles in a trust:
The settlor who establishes and puts assets into a trust
The trustee who owns and manages the trust
The beneficiary who receives the assets in the trust
The settlor and trustee may be the same person. There may be more than one trustee, and these can change.
Trusts may be subject to charges, including income tax, capital gains tax, inheritance tax and stamp duty.
Why should you have a trust?
A trust can be an effective way of protecting family wealth, supporting a charity, or managing assets for your children or those who are incapacitated.
It also gives you control over your assets, so you can stipulate how they are used, even after your death.
There are many benefits to having a trust, which are explored below.
Asset protection: Trusts help protect assets from creditors or potential legal claims.
Estate planning: Trusts can help reduce inheritance tax liabilities, ensuring more of your assets are passed on to your beneficiaries.
Probate avoidance: Assets held in a trust do not go through the probate process, which means they can be distributed to beneficiaries more quickly.
Privacy: Unlike a will, the details of a trust are not publicly disclosed, so they offer greater confidentiality.
How do I register a trust in the UK?
Most trusts established in the UK need to be registered with HMRC.
The registration process can be completed online via the government’s Trust Registration Service (TRS).
To register your trust, you must first set up a Government Gateway account. This can’t be your personal account – it must be one for an organisation.
If you cannot register the trust online, you should notify HMRC, and they will let you know how to proceed.
Are there any exclusions?
Yes, some non-taxable trusts are exempt from registration.
Trusts that hold assets of a UK-registered pension scheme.
Will trusts, which are created under a will that takes effect on death (as long as they only hold estate assets for up to two years after the person’s death).
Trusts set up for bereaved children, or adults aged 18-25, under a parent’s will or the Criminal Injuries Compensation Scheme.
A full list of trusts exempt from registration is available on the HMRC website.
Who has to register a trust?
Typically, the trustees are responsible for registering a trust, but you can also choose to use an agent.
Solicitors or accountants involved in setting up the trust may also assist with the registration process.
How much does it cost to register a trust?
HMRC does not charge a fee for its TRS as it’s a free online service.
However, if you use a solicitor or other adviser to help with the process, you will have to pay for their services.
What information do I need to provide?
A lead trustee should be appointed as the main point of contact for HMRC.
They will need to provide the following information:
The name of the trust.
The date the trust was created.
Any UK land or property the trust has purchased.
Whether or not it’s an express trust.
Non-UK trusts also must provide information about business relationships in the UK.
All those involved with the trust, including trustees, settlors and beneficiaries, must provide their names, dates of birth, contact information and country of birth/residence, as well as other relevant information.
The lead trustee needs to provide their National Insurance number and Unique Taxpayer Reference (UTR).
Taxable trusts have to provide additional information, which is available on HMRC’s website.
What happens after you register a trust?
If your trust is taxable, the lead trustee will receive a UTR, usually within 15 working days.
If the trust is not liable to pay tax, you can find your UTR by logging into the TRS.
You can then use this UTR to report any income and gains from the trust to HMRC via Self-Assessment.
You should also keep accurate records of all trust transactions and activities.
What happens if I don't register a trust?
Trusts need to be registered within 30 days of creation.
If you fail to register a trust within 30 days, and it’s not exempt from registration, you may be subject to penalties.
These penalties are usually in the form of fines, and HMRC may take legal action to ensure compliance.
There are many compelling reasons to set up a trust.
It gives you complete control over how and when your assets are distributed and allows you to provide ongoing support to dependents or charitable organisations.
Registering a trust is a crucial first step in ensuring the proper management of your assets.
While the process may seem complex, it's essential for financial planning and compliance.
Whether you need help setting up a trust or registering it, Unbiased can connect you with regulated financial advisers who can help.