New statistics show CGT up 27% on trusts

HMRC have published 'Statistics on trusts in the UK October 2023'. Three-quarters of those trusts registered with HMRC signed up between 1 April 2022 and 31 March 2023 as a result of the new Trust Registration Service rules. Capital Gains Tax payable by trust increased by 27% in the tax year ending 5 April 2022 when compared to the previous year.

The latest statistics show that:

• The Trust Registration Service (TRS) had 633,000 trusts and estates registered up to 31 March 2023 that remain open as of 31 August 2023.
• For Interest in possession trusts, those with the highest income bands (over £100,000) saw an increase in income of 24% and accounted for over 70% of all income. Other bands remained the same.
• Around three-quarters of registered and open trusts and estates were registered in the period between 1 April 2022 and 31 March 2023. 
• Total income of trusts and estates in the 2021-22 tax year was £3,075 million, moving above pre-pandemic highs where income was £3,050 million in the 2019-20 tax year.

Breakdown of Income Tax liability and total Capital Gains Tax by trust type

Trust registrations

HMRC have changed the way they count registered trusts and estates since the previous publication. Figures now exclude records that have subsequently been marked as closed or obsolete and represent the number of new trust and estate registrations in each 12-month period ending March that are still recorded as open as of 31 August 2023. This sits alongside the new requirement that all UK express trusts, including non-taxable express trusts, were required to sign up with the Trust Registration Service by 1 September 2022.

• In the 12-month period up to 31 March 2023, 462,000 trusts and estates registered on TRS and remain open as of 31 August 2023.
• This is a substantial increase from the previous 12-month period when there were 33,000 registrations and will be as a result of the TRS now requiring all express UK trusts to be registered by 1 September 2022.
  • This is borne out by the fact that around 90% of the trusts and estates registered in the 12-month period up to 31 March 2023 are non-taxable trusts.
• The number of Estate registrations has continued to increase at a similar rate to previous years, with around 6,000 estates registered and recorded as open in the period between 1 April 2022 to 31 March 2023.

Overall trends

• The total number of trusts and estates in the UK submitting Self Assessment returns fell by 3% in 2021-22 compared to the previous year.
• This decline continues the long-term downward trend across all the main types of trust, with the total number of trusts and estates submitting Self Assessment returns reducing by 12% since 2016-17.

Interest in possession trusts

An ‘Interest in Possession’ (IIP) trust is one where the beneficiary is entitled to trust income as it arises.

• There has been a 3% fall in the number of interest in possession trusts between 2020-21 and 2021-22 to 44,000.
• This decrease in the number of interest in possession trusts is mainly driven by trusts with income between £1,000 and £10,000.
• Total income was £1,085 million in the 2021-22 tax year, which represents a 16% increase when compared to the previous year.
• There has been an increase across all income types except for interest income.
  • Dividend income rose by around one-fifth to £520 million.
  • Chargeable gains for interest in possession trusts is £1,780 million for 2021-22, which is a recent high.
• Around 46% of interest in possession trusts had income of less than £1,000, with their total income being less than £5 million.
• Around 7% of trusts had income of more than £100,000, accounting for £765 million of income.
• Overall, approximately one-fifth of interest in possession trusts had income greater than £20,000 and these trusts accounted for around 91% of the total income.
• The income distribution for interest in possession trusts is more skewed towards the highest income band (£100,000 or more) for 2021-22 when compared to the previous year.
  • Income in this band has increased substantially by 24%, while income in all other bands has remained at similar levels.
  • Trusts in the highest income band now account for 71% of all income, compared to 66% in 2020-21.

Trusts paying tax at the special trust rate

Special trust rates apply to Discretionary trusts. A discretionary trust is one where the trustees have ‘discretion’ about how to use the income of the trust and capital of the trust, subject to the terms of the trust deed.

• The number of trusts paying Income Tax at the special trust rates by income band in 2021-22 has decreased by 3% when compared to the previous year.
• The number of these trusts has fallen in every income band between £0 and £10,000, which accounts for just under three-quarters of these trusts.
• The total income of trusts paying tax at the special trust rates was £1,615 million in the tax year ending 2022, rising by 18% compared with 2020-21.
  • This increase is mainly driven by a 37% rise in dividend-type income to £940 million, which is now closer to pre-pandemic levels of £965 million observed in 2019-20.
• Chargeable gains for trusts paying tax at the special trust rates has increased substantially to £2,805 million in 2021-22, compared to £1,920 million in 2020-21.
• There were around 82,000 trusts paying Income Tax at the special trust rates in 2021-22.
  • Of these, 32,000 had income less than £1,000, while 3,500 trusts had income greater than £100,000.
• The income of trusts paying tax at the special trust rate with income more than £100,000 increased from £845 million in 2020-21 to £1,085 million for 2021-22.
  • The trusts in this income band accounted for around 67% of the total income in 2021-22, compared to 62% in the previous year.

Tax Liability

• Total Income Tax increased to £765 million for 2021-22, an increase of 13% compared with the previous year.
  • Over three-quarters of Income Tax comes from trusts paying tax at the special trust rate, which increased by 14% to £580 million, returning to near pre-pandemic levels observed in 2019-20.
  • Income Tax from interest in possession trusts also increased to pre-pandemic levels of £140 million observed in 2019-20.
• Capital Gains Tax payable saw a second consecutive tax year of substantial increases, reaching a high of £1,055 million for 2021-22.  

Useful guides on this topic

Trust Registration Service
What is the Trust Registration Service? What trusts does it apply to? What are the requirements and deadlines?

Estates: Income Tax and Capital Gains Tax
How do executors deal with income and capital gains arising on the deceased’s estate? What allowances and reliefs are available?

Trusts & Tax planning
What is a trust? How can trusts be used in tax planning? What are the advantages and what are the pitfalls?

UK Trusts
What is a trust? What types of trust are there? How are UK trusts taxed?

How to set up a UK trust
What are the tax implications of setting up a trust? What do I need to do as a settlor? What do the trustees need to do? 

How to wind up a UK trust
What are the tax implications of winding up a trust? What do I need to do as a trustee to wind up a trust? Why wind up a trust?

Non-resident trusts
When is a trust non-resident? What are the UK tax implications of a non-resident trust? What are the UK tax implications for any beneficiaries? What are the UK administrative requirements for a non-resident trust?

External links

HMRC (National statistics): Statistics on trusts in the UK October 2023