Landlord Property Trust Guide 2026 — Bare Trust, Discretionary Trust, HMRC TRS Registration and Trustee Obligations

Bare trusts, discretionary trusts and their tax treatment

The two structures serve different purposes and are taxed entirely differently — understanding which applies (and which is appropriate) requires professional legal and tax advice:

• Bare trust (nominee arrangement) — look-through tax treatment: In a bare trust, the trustee holds the legal title to the property as a mere nominee for the beneficiary — the beneficiary has an immediate, indefeasible right to the property and its income. The trustee acts solely as directed by the beneficiary and has no active management role. HMRC 'looks through' the bare trust structure for tax purposes: the beneficiary is treated as if they personally own the property and directly receive the rental income. The beneficiary therefore: (a) reports rental income on their own self-assessment tax return (SA100) and pays income tax at their personal marginal rate — not the trust's 45% rate; (b) on disposal of the property, pays CGT in their own name at their personal CGT rates (24% for higher-rate taxpayers on residential property from October 2024; 18% for basic-rate taxpayers) and is entitled to use their personal annual CGT exemption (£3,000 for 2024-25). Common uses of bare trusts in landlord contexts: (a) nominee ownership for privacy — a landlord holds property in a nominee's name to avoid their name appearing on the Land Register (relevant for high-profile individuals or those concerned about public disclosure); (b) family arrangements — a parent holds property registered in their own name as nominee for an adult child who is the true beneficial owner; (c) administrative convenience — a managing trustee holds property registered in one name on behalf of multiple beneficial co-owners (avoiding the complication of multiple names on the legal title). Note on TRS: the TRS position on bare trusts is complex — HMRC guidance suggests that some simple nominee arrangements (where the nominee is acting purely as agent for a sole individual beneficiary) may be exempt from TRS registration. However, the exemptions are narrow and the legal position is uncertain — landlords using bare trust/nominee arrangements should seek legal advice on whether TRS registration is required for their specific arrangement
• Discretionary trust (relevant property trust) — full trust tax regime: In a discretionary trust, the trustees hold the property for the benefit of a class of beneficiaries (e.g., 'my children and grandchildren'). The trustees have discretion over which beneficiaries receive income and capital, and when. No beneficiary has a fixed entitlement to any specific payment until the trustees exercise their discretion. The tax treatment of a discretionary trust is fundamentally different from a bare trust: (a) Income tax: the trust itself is a separate taxpayer. Trust income (including rental income net of allowable expenses) is taxed at the trust rate — currently 45% on income above a standard rate band of £1,000; 8.75% on income within the first £1,000 standard rate band. When the trustees distribute income to a beneficiary, the beneficiary receives a net payment together with an R185 Trust Income certificate showing the tax already paid. The beneficiary includes the grossed-up trust income on their own return and may be entitled to reclaim some or all of the trust rate tax if they pay tax at a lower marginal rate; (b) CGT: the trust pays CGT on disposals at 24% (residential property from October 2024 — reduced from 28% following Budget 2024 rate reduction). The annual CGT exemption for most trusts is now £1,500 (significantly reduced from £6,150 in 2023-24 and £12,300 in 2022-23 following the Government's CGT allowance reduction programme); (c) Inheritance Tax: discretionary trusts are relevant property trusts — the most complex area of the trust tax regime. The relevant property regime involves: (i) Entry charge: a chargeable lifetime transfer (CLT) arises when property is transferred to a discretionary trust by a living transferor. IHT is charged at 20% on the value of the transfer above the transferor's available nil rate band (currently £325,000 — or £650,000 for a married couple where the first spouse's NRB has not been used). This entry charge is typically reported on IHT100; (ii) 10-year periodic charge: on every 10th anniversary of the trust's creation, IHT is charged on the net value of the trust assets at that date. The effective maximum rate is 6% every 10 years (30% of the 20% standard rate × the proportion of the 10-year period for which the property has been in the trust); (iii) Exit charge: IHT is charged when property leaves the trust (distributed to a beneficiary; appointed to a sub-trust). The exit charge is proportional to the time elapsed since the last 10-year charge. IHT planning use: transferring property into a discretionary trust starts a 7-year clock — if the transferor survives 7 years from the CLT, the CLT falls outside the transferor's estate for IHT (though within 7 years, taper relief reduces the IHT charge). Each 10-year charge erodes the trust fund at a maximum of 6% per decade

HMRC Trust Registration Service, trustee obligations and landlord compliance

Two key operational requirements for all property-holding trusts — TRS registration and ongoing landlord compliance — apply regardless of the trust type:

• HMRC Trust Registration Service (TRS) — mandatory for all express trusts: The UK's implementation of the 5th Anti-Money Laundering Directive (5MLD) required HMRC to expand the Trust Registration Service to cover ALL express trusts (not only those with a UK tax liability) from 1 September 2022. An express trust is one that has been deliberately created by an express act — as opposed to a statutory or constructive trust arising by operation of law. A property-holding trust (whether bare or discretionary) created by a deed or declaration of trust is an express trust and must be registered with the TRS. Registration is via the TRS online portal at trust-registration.service.gov.uk — the lead trustee creates an account and provides: (a) full details of the trust (name; date of creation; type of trust; governing law); (b) details of all trustees (name; date of birth; National Insurance number; address); (c) details of all beneficiaries (or class of beneficiaries — in a discretionary trust, named beneficiaries must be identified where ascertainable; the class of potential beneficiaries is also described); (d) details of the trust's assets (including all trust-owned properties — address; approximate value); (e) details of the settlor (the person who created the trust). Annual updates must be filed with the TRS within 90 days of any change (change of trustee; change of beneficiary; change of trust assets; change of contact details). Penalties for failing to register or update: HMRC can impose a penalty of £100 per registrable trust per registration failure — increasing for persistent non-compliance. Exemptions from TRS: (a) statutory trusts (arising on intestacy; co-ownership of land as joint tenants — joint tenancy is not a trust for TRS purposes); (b) trusts of registered pension schemes; (c) trusts created by court order; (d) bare trusts that are simple nominee arrangements for a sole individual (but the exemption boundary is uncertain — legal advice needed); (e) certain charity trusts (registered charities are separately regulated)
• Trustee obligations and landlord compliance within a trust: The trustees of a property-holding trust have fiduciary duties under the Trustee Act 2000 (England and Wales) — including the duty to act in the best interests of the beneficiaries; the duty to invest trust assets prudently (applying the standard investment criteria of the Trustee Act 2000); the duty to act impartially between beneficiaries; the duty to keep trust accounts; and the duty to act unanimously (where there are multiple trustees) or by majority as specified in the trust deed. For property-holding trusts, landlord compliance obligations fall on the trustees as legal owners and managers of the property: (a) Gas safety: the trustee(s) must ensure an annual gas safety check is carried out and a valid Gas Safety Certificate is in place — the trustees are the 'landlord' for the purposes of the Gas Safety (Installation and Use) Regulations 1998; (b) Electrical safety: the trustees must commission periodic electrical inspections (EICR) as required by the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020; (c) EPC: an Energy Performance Certificate must be obtained on reletting and be at least EPC Band E (MEES requirements apply to trust-owned properties as they do to individually-owned BTL properties); (d) Deposit protection: the trustees must protect deposits taken from assured tenancy tenants in an authorised scheme within 30 days and serve the prescribed information — the trustees are the 'landlord' for the purposes of HA 2004 ss.213-215; (e) Right to rent checks: the trustees must ensure right to rent checks are carried out before the start of the tenancy — or appoint a managing agent to carry these out on their behalf; (f) Tax: the trustees must register with HMRC for self-assessment, file an annual trust SA900 tax return (for a discretionary trust or any trust with income above the reporting threshold), pay any income tax and CGT liabilities of the trust, and issue R185 Trust Income certificates to beneficiaries on income distributions. In bare trusts where the beneficiary pays tax directly, the trustees may not need to submit a SA900 but should confirm this with their accountant

Frequently asked questions