What are the responsibilities for managing the 10-Year charge on trusts?

The responsibilities for managing the 10-Year charge on trusts include keeping accurate records of all additions and distributions, obtaining up-to-date valuations for assets, calculating and paying any inheritance tax due, and filing form IHT100 (and IHT100a if needed) within six months of the anniversary.

Understanding The 10-Year Charge On Trusts Without The Headaches

Q: What is the 10-Year charge on trusts?

The 10-Year charge on trusts is a periodic charge that typically applies to discretionary trusts and some interest in possession trusts, where every decade you may owe up to 6% inheritance tax on the value of relevant property held at the anniversary.

Q: How is the 10-Year charge on trusts calculated?

The 10-Year charge on trusts is calculated using a notional lifetime transfer model, taking into account the value at the anniversary, any business or agricultural relief, any previous chargeable transfers by the settlor reducing the nil-rate band, and any additions or distributions.

Q: How can one avoid stress when dealing with the 10-Year charge on trusts?

One can avoid stress when dealing with the 10-Year charge on trusts by keeping a clear timeline, maintaining records, scheduling valuations well ahead of the date, and seeking advice from an expert if the trust is complex. This will ensure the 10-Year charge on trusts never blindsides you.

CREATED BY HELEN BEAUMONT

Published: 10/09/2025 @ 09:02AM

#10-Year charge on trusts #TrustTax #IHT #HMRC #EstatePlanning #Trustees

The 10-Year charge on trusts can be a confusing subject for many, so here's a clear, friendly guide in blog post form. Learn what it is, how it's calculated, and what you need to do. Stay compliant and avoid surprises ...

10-Year charge on trusts, Loyalty and growth abound, A decade of trust

You don't need to be a tax expert to get the essentials right, but you do need a plan for the 10-year charge on trusts so you're not caught out when HMRC comes calling.

You're dealing with a periodic charge that typically applies to discretionary trusts and some interest in possession trusts, where every decade you may owe up to 6% inheritance tax on the value of relevant property held at the anniversary.

You'll want to mark the calendar from day one, as the first periodic charge lands exactly 10 years after the trust began, and memories fade, trustees change, and assumptions can creep in.

Especially the mistaken belief that tax only arises
when cash leaves the trust!

You should expect a calculation that isn't a flat rate, because HMRC uses a notional lifetime transfer model to set the effective rate, taking into account the value at the anniversary, any business or agricultural relief, any previous chargeable transfers by the settlor reducing the nil-rate band, and any additions or distributions.

You'll likely find that accurate asset values are non‑negotiable, so obtaining up-to-date valuations for investments, property, and cash at the exact anniversary date is essential, and if the trust holds shares or real estate, professional valuations can save you from costly errors.

Remember, you are responsible for the admin as well as the maths, which means calculating any inheritance tax due, paying it, and filing form IHT100d (and IHT100a for gifts and transfers if needed) just before the anniversary; miss the deadline and HMRC can levy penalties and interest, even if the final tax is nil.

You might decide to get advice if the trust is older, has a complex history, includes property or unlisted shares, or the settlor created multiple settlements, because aligning nil-rate bands, tracking historic transfers, and modelling effective rates for the 10-year charge on trusts can be deceptively complex.

You can avoid stress by keeping a clear timeline!

It is essential to maintain records of all additions and distributions, scheduling valuations well ahead of the date, and sense‑checking the position with an adviser who can complete the IHT100, calculate accurately, and flag future anniversaries.

And this will ensure the 10-year charge on trusts never blindsides you.

Until next time ...

HELEN BEAUMONT
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#10-Year charge on trusts #TrustTax #IHT #HMRC #EstatePlanning #Trustees

About Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.

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Understanding The 10-Year Charge On Trusts Without The Headaches

Especially the mistaken belief that tax only ariseswhen cash leaves the trust!

You can avoid stress by keeping a clear timeline!

Especially the mistaken belief that tax only arises
when cash leaves the trust!