Who pays tax on a bare trust?

The beneficiary. HMRC's Trusts, Settlements and Estates Manual (TSEM1563) says 'the beneficiary of a bare trust is taxable on the trust income and gains', and that the trustees are not required to make a tax return. Income and gains are added to the beneficiary's own and taxed using their own allowances. The main exception is money given by a parent to their own child under 18: if the income from it is more than £100 a year, it is taxed as the parent's income under section 629 of the Income Tax (Trading and Other Income) Act 2005.

At what age can a beneficiary take the money from a bare trust?

In England and Wales, gov.uk says the beneficiary has the right to all of the capital and income at any time once they are 18. In Scotland the age is 16. The person who set up the trust cannot hold the money back beyond that age. If you want the trustees to keep control until a later age, a different type of trust, such as a discretionary trust, is usually used. Source: gov.uk, Types of trust.

Does a bare trust need to be registered with HMRC?

Often, yes. HMRC's Trust Registration Service Manual (TRSM10030) says 'there is no specific exclusion from registration for bare trusts' and that a bare trust which is an express trust should generally register on the Trust Registration Service. Some common bare trust arrangements are excluded, such as a trust set up to open a bank account for a child, or a small trust under the £2,000 asset limit. Bare trusts are not usually registered as taxable trusts, because the tax is the beneficiary's responsibility.

Can a bare trust be set up in a will?

Yes. A will can leave money to a child or grandchild on bare trust, with the executors or named trustees holding it until the child is old enough. HMRC's manual (TSEM1563) gives the example of a grandmother leaving her estate to her grandchildren with payment deferred until 21: because the grandchildren have no other conditions to meet, the trust is still bare and the income is taxed as theirs. If the gift depends on a condition, such as the grandchild reaching 21 before they are entitled at all, it is not a bare trust.

What is the difference between a bare trust and a discretionary trust?

In a bare trust, the beneficiary is fixed and absolutely entitled to everything, and the trustees simply hold the assets for them. In a discretionary trust, the trustees decide who benefits, how much and when. The tax is very different. A bare trust is taxed as the beneficiary's own money. A discretionary trust pays its own income tax and Capital Gains Tax at trust rates and faces inheritance tax charges every 10 years and when assets leave.

Bare trusts explained: how they work and how inheritance tax, CGT and income tax apply

Q: What is a bare trust?

A bare trust is the simplest kind of trust. gov.uk explains that 'assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the capital and income of the trust at any time if they're 18 or over (in England and Wales), or 16 or over (in Scotland).' The trustees look after the assets, but the beneficiary owns them in every sense that matters for tax. Bare trusts are often used to pass money or investments to children and grandchildren. Source: gov.uk, Types of trust.

Q: Is a bare trust subject to inheritance tax?

A gift into a bare trust is treated like an outright gift to the beneficiary. gov.uk says transfers into a bare trust 'may also be exempt from Inheritance Tax, as long as the person making the transfer survives for 7 years'. Once the money is in the trust, HMRC's Inheritance Tax Manual (IHTM16030) says a bare trust is not settled property, so it is outside the 10-year and exit charges that apply to discretionary trusts. The assets are treated as the beneficiary's own. Source: gov.uk, Trusts and Inheritance Tax.

A bare trust is the simplest trust there is. Someone holds money, shares or property in their name, but it belongs to one named person, usually a child or grandchild, who can take it all once they are old enough. You may come across one because a parent or grandparent left money to a child in their will, or because a pension scheme paid a death benefit to a child and appointed trustees to hold it.

This guide explains how a bare trust works, how each tax applies, and when a bare trust is the right tool.

The short version:

The beneficiary is absolutely entitled to the capital and income and can take it all at 18 in England and Wales, or 16 in Scotland
For tax, the assets are treated as the beneficiary’s own. They pay any income tax and Capital Gains Tax, using their own allowances
Exception: if a parent puts money in for their own child under 18 and it produces more than £100 of income a year, that income is taxed as the parent’s
A gift into a bare trust is a normal lifetime gift for inheritance tax. If the giver survives seven years, it is outside their estate
There are no 10-year or exit charges on the trust itself
Many bare trusts still need registering on HMRC’s Trust Registration Service

What a bare trust is

gov.uk defines it this way: “Assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the capital and income of the trust at any time if they’re 18 or over (in England and Wales), or 16 or over (in Scotland). This means the assets set aside by the settlor will always go directly to the intended beneficiary” (gov.uk – Types of trust).

There are three roles:

The settlor is the person who puts the assets in. This might be a parent, grandparent, or a person who has died and left the gift in their will
The trustee holds the assets in their name and manages them. HMRC notes that bare trustees are often called “nominees”, especially when they hold shares
The beneficiary owns the assets. HMRC’s manual describes a bare trust as one where “each beneficiary has an immediate and absolute title to both capital and income” (HMRC TSEM1563)

The trustee’s job is mostly safekeeping. They cannot choose a different beneficiary, change the shares or keep the money once the beneficiary is entitled to it.

If a will has left money to a child on bare trust

If someone close to you has died and left money to your child or grandchild on bare trust, this is what it means in practice:

Who holds the money. The executors, or the trustees named in the will, hold it in their names until the child reaches 18 (16 in Scotland)
Inheritance tax. A gift left in a will is part of the estate, so any inheritance tax is worked out and paid by the executors before the money reaches the trust (see how to pay inheritance tax). The seven-year rule for lifetime gifts, covered further down, does not apply to it
Income tax and CGT. Interest, dividends and gains from the money are taxed as the child’s own, using the child’s allowances. The £100 parental rule explained below does not apply, because the gift came from a grandparent or from a parent who has died
Tax returns. The trustees do not file a trust tax return. A Self Assessment return is only needed for the child if their income or gains go above their allowances
Registering with HMRC. A trust created by a will has two years from the date of death before it needs to go on HMRC’s Trust Registration Service. If it is still running after two years, the trustees usually need to register it within 90 days, unless an exclusion applies, such as a trust set up only to hold a bank account for the child
At 18. The child can ask for everything, and the trustees must hand it over

When bare trusts are used

gov.uk says bare trusts “are often used to pass assets to young people – the trustees look after them until the beneficiary is old enough”. Common situations include:

A gift in a will to a child or grandchild. The executors, or trustees named in the will, hold the inheritance until the child reaches 18. Our guide to a trust in a will compares this with the other trust types a will can create
A pension death benefit paid for a child. HMRC’s manual gives the example of pension scheme trustees awarding £20,000 to a nine-year-old after a scheme member died, with trustees appointed to look after it until she is 18. HMRC confirms “this is a bare trust”
Lifetime gifts from grandparents, often as savings or investments held in a parent’s name for the child
Property held by a nominee, where one person is the legal owner on behalf of another

When a gift is a bare trust and when it is not

The test is whether the beneficiary is already entitled, with nothing left to happen. HMRC’s manual gives two contrasting will examples (TSEM1563):

Wording in the will	Bare trust?	Why
Estate to “such of my grandchildren as were alive at the date of my death”, not to be paid until each reaches 21	Yes	Every grandchild alive at the death is entitled. The age only delays payment
Estate to “such of my grandchildren as survive me and attain age 21”, with a share passing to the others if one dies first	No	A grandchild must reach 21 before they are entitled at all, so the gift is conditional

If you are an executor or trustee and are not sure which side of this line a will falls on, ask the solicitor who handles the estate. HMRC says it is up to the trustees to establish whether a trust is bare.

How bare trusts are taxed

Tax	Who it falls on	Key point
Income tax	The beneficiary	Set against the beneficiary’s Personal Allowance. Parent-to-child gifts over £100 of income a year are taxed on the parent
Capital Gains Tax	The beneficiary	Set against the beneficiary’s £3,000 annual exempt amount. No CGT when the assets pass to the beneficiary
Inheritance tax on the gift in	The settlor	A lifetime gift that drops out of the settlor’s estate after seven years
Inheritance tax while held in trust	None	Not settled property, so no 10-year or exit charges
Inheritance tax on the beneficiary’s death	The beneficiary’s estate	Counted in the beneficiary’s estate

Sources: gov.uk – Trusts and Income Tax; gov.uk – Trusts and Capital Gains Tax; gov.uk – Trusts and Inheritance Tax; HMRC IHTM16030.

Income tax on a bare trust

gov.uk says: “If you’re the beneficiary of a bare trust you’re responsible for paying tax on income from it.” The income is theirs for tax purposes, so it is set against their own tax-free Personal Allowance, which gov.uk gives as £12,570 for most people (gov.uk – Income Tax rates and Personal Allowances). A child with no other income can therefore receive a fair amount of savings interest or dividends from a bare trust without any tax to pay.

If tax is due, the beneficiary declares it on a Self Assessment return. HMRC’s manual says the trustees “are not required to make a tax return”, although they may pay basic rate tax on the beneficiary’s behalf (TSEM1563).

The £100 rule for gifts from parents

There is one important exception. Under section 629 of the Income Tax (Trading and Other Income) Act 2005, income from a gift made by a parent to their own child is taxed as the parent’s income while the child is under 18 and unmarried. The rule does not bite if the child’s income from parental gifts is £100 or less in the tax year. Above £100, the whole amount is taxed on the parent (legislation.gov.uk – ITTOIA 2005, s.629).

The rule stops parents moving their own savings into their children’s names to use the children’s allowances. It does not apply to gifts from grandparents, other relatives, or money a child inherits under a will after a parent has died, because section 629 only applies “during the life of the settlor”.

Capital Gains Tax on a bare trust

Section 60 of the Taxation of Chargeable Gains Act 1992 says that where someone holds property as a bare trustee, the tax rules apply “as if the property were vested in” the beneficiary (legislation.gov.uk – TCGA 1992, s.60). In plain terms, the trustee is ignored for CGT.

That has three practical effects:

When the trustees sell an asset at a gain, the gain is the beneficiary’s. It is set against their annual exempt amount, which gov.uk gives as £3,000 (trusts get £1,500, but that lower figure does not apply to a bare trust) (gov.uk – Capital Gains Tax allowances)
gov.uk confirms “there’s no tax to pay in bare trusts if the assets are transferred to the beneficiary” when they reach 18
Putting assets into the trust can be a disposal by the settlor. gov.uk says the tax is paid by the person “transferring the asset (the ‘settlor’)”. Cash raises no CGT, but shares or property that have gone up in value may

HMRC’s manual adds that bare trustees cannot report capital gains on a trust return. Gains remain “the beneficiaries’ responsibility only” (TSEM1563).

Inheritance tax on a bare trust

Putting money into a bare trust

gov.uk says transfers into a bare trust “may also be exempt from Inheritance Tax, as long as the person making the transfer survives for 7 years after making the transfer” (gov.uk – Trusts and Inheritance Tax). This section applies to gifts made during someone’s lifetime. It is the same treatment as an outright gift, which HMRC calls a potentially exempt transfer. If the giver dies within seven years, the gift is counted back into their estate, and any tax on it can be reduced on a sliding scale (taper relief) if they survived at least three years. Our guide to gift rules and the seven-year rule explains how that works.

This is the main difference from a discretionary trust. For transfers into most other trusts, gov.uk’s Trusts and Inheritance Tax guidance says inheritance tax is due at 20% on anything above the £325,000 threshold at the time of the transfer, once earlier chargeable gifts in the previous seven years are added in.

While the money is in the trust

HMRC’s Inheritance Tax Manual lists a bare trust as an example of property held by trustees that is “not settled property” (IHTM16030). That means none of the special trust charges apply: no 10-year anniversary charge or exit charge, and no trust inheritance tax form to file.

If the beneficiary dies

Because a bare trust is not settled property, the assets are treated as belonging to the beneficiary. If the beneficiary dies, they form part of the beneficiary’s estate, even if the trustees still hold them. Inheritance tax is only due on an estate above the tax-free threshold, the nil-rate band of £325,000, so for most young beneficiaries this has no practical effect.

Registering a bare trust with HMRC

HMRC’s Trust Registration Service Manual says: “There is no specific exclusion from registration for bare trusts. In general, if a bare trust is an express trust it should register on TRS” (HMRC TRSM10030).

Several exclusions often apply, though:

A trust set up to open a bank account for a child is excluded (gov.uk – Check if you need to register a trust)
A will trust holding only estate assets has two years from the death before it needs registering
Small trusts with no UK land, assets under £2,000, never more than £10,000 in total, income under £5,000 a year and no tax liability are excluded (one per settlor)

HMRC adds that bare trusts “are not usually required to register for taxable purposes, because any UK tax liability is incurred by the beneficiaries rather than the trustees”. The exception is a bare trustee who takes on a new property lease, because the trustee then becomes liable for Stamp Duty Land Tax. Our Trust Registration Service guide covers deadlines, how to register and the £5,000 penalty.

Advantages and drawbacks of a bare trust

Advantages:

Simple to set up and run, with no trust tax return
Income and gains use the beneficiary’s allowances, which for a child are often unused
No ongoing inheritance tax charges on the trust
The beneficiary is guaranteed to receive the money

Drawbacks:

The beneficiary gets full control at 18 (16 in Scotland). Nobody can stop an 18-year-old spending the lot, and the settlor cannot change their mind
No flexibility: the beneficiary and their share are fixed for good
Gifts from parents to their own children run into the £100 income rule
The assets count as part of the beneficiary’s estate

If those drawbacks matter, a discretionary trust or, for a bereaved child, a trust for a bereaved minor or an 18-to-25 trust may suit better. gov.uk explains the special treatment for these in its guide to trusts for vulnerable people.

Where to get help

Setting up a bare trust in a will, or deciding whether an existing gift is a bare trust, involves legal drafting and tax judgement. A solicitor who specialises in wills and trusts, or a chartered tax adviser, can help. For the wider picture on passing money on, see our guides to inheritance tax exemptions and reliefs and the inheritance tax hub.

Last verified 18 October 2026.