When Capital Gains Tax might be payable

Capital Gains Tax might be payable when:

• assets are put into a trust
• assets are taken out of a trust
• a beneficiary gets some or all of the assets in a trust

Who has to pay the tax and when it must be paid is detailed in the Trusts and taxes guide.

When Capital Gains Tax is not payable

In some situations an asset may be transferred to someone else but Capital Gains Tax is not payable.

Someone dies and leaves their assets to a beneficiary or trust

When a person dies and they leave their assets to someone, whether they’re in a trust or not, there’s no Capital Gains Tax to pay.

If the asset is sold, transferred or disposed of at a later date, and has increased in value since the date of death, Capital Gains Tax may be due.

This applies to either trustees or beneficiaries who inherit the asset under the:

• terms of a will
• rules of inheritance that apply in England and Wales when there’s no will

Someone dies and an interest in possession comes to an end

This happens in interest in possession trusts — where a beneficiary has an immediate and absolute right to income from an asset held in trust. There’s usually no Capital Gains Tax to pay when the beneficiary dies and their interest in possession comes to an end.

Work out how much Capital Gains Tax is due

Capital Gains Tax on trusts is worked out for each tax year (which runs from 6 April one year to 5 April the next). You can work out how much you need to pay by following 4 steps:

1. Work out the gain or loss for each item you sell, transfer or otherwise dispose of, taking off any allowable costs and reliefs.

2. Take off the trusts’ total allowable losses from the total gains — to arrive at the net gain or loss.

3. Factor in trust losses brought forward from earlier years.

4. Take off the trustees’ tax-free allowance.

The remaining amount is taxed at the rate of Capital Gains Tax for trustees in the 2024 to 2025 tax year.

Rates from 30 October 2024 onwards

24% on gains from residential property and from other chargeable assets.

Rates from 6 April 2024 to 29 October 2024

20% (not including residential property). 24% for disposals of residential property.

The rates and thresholds for earlierother years are different.

There’s more guidance in the Trust and estate capital gains notes.

Allowable costs

Trustees can deduct certain expenses when they work out the trust’s capital gains. The 2 most common types of expense are:

• the cost of improving property or land to increase its value when it’s sold or transferred — like building a conservatory
• the costs involved in buying and transferring or selling the item — like having a property valued before selling it or paying solicitor or stockbroker fees

The types of expense that are allowed depend on the type of asset. You can read more about allowable expenses on page 12 of the Trust and estate capital gains notes.

Reliefs

There are several different reliefs available that trustees may be able to use to reduce the trust’s Capital Gains Tax.

Relief	Description
Private Residence Relief	Trustees pay no Capital Gains Tax when they sell a property the trust owns. It must be the main residence for someone the trust says can live there.
Business Asset Disposal Relief	Trustees pay 14% (on disposals on or after 6 April 2025) or 10% (on disposals before 5 April 2025) Capital Gains Tax on qualifying profits if they sell assets used in the beneficiary’s business, which has now ended.
Hold-over Relief	Trustees pay no tax if they transfer assets to beneficiaries (or other trustees in some cases). The recipient may pay tax when they sell or dispose of the asset.

Allowable losses

As well as paying tax on gains, trustees work out any losses from sell or disposal of assets. They must offset these against taxable gains. You record losses, including those carried forward from previous years, on Self Assessment: trust and estate capital gains (SA905).

Example

In 20222023 to 20232024 a trust has capital gains of £12,000 and allowable losses of £17,000. The trustees take the losses away from the gains, leaving no chargeable gains for the year. There’s no Capital Gains Tax to pay and unused losses of £5,000 to carry forward to 20232024 to 2024.2025.

In 20232024 to 20242025 the trust has gains of £7,000 and no losses. The trustees only use £4,000 of the previous year’s losses to reduce the gain to the level of the annual exempt amount — £3,000 for 20232024 to 2024.2025. They still have £1,000 of unused losses left to carry forward to 20242025 to 2025.2026.

Tax-free allowance

Trustees only have to pay Capital Gains Tax if the total taxable gain is above the trust’s tax-free allowance (called the annual exempt amount).

Period	Tax-free allowance	Tax-free allowance if the beneficiary is disabled
6 April 20242025 to 5 April 20252026	£1,500	£3,000
6 April 20232024 to 5 April 20242025	£3,000£1,500	£6,000£3,000
6 April 20222023 to 5 April 20232024	£6,150£3,000	£12,300£6,000
6 April 20212022 to 5 April 20222023	£6,150	£12,300
6 April 20202021 to 5 April 20212022	£6,150	£12,300

If a trust’s settlor has set up more than one trust (settlement), the tax-free allowance will be divided equally between the number of trusts, up to a maximum of 5. If there are 5 or more, the tax-free allowance would remain the same for each subsequent trust.

For example, in 2022 to 2023 a trusts tax-free allowance is £6,150. If a settlor has set up 2 trusts, each trust would get an equal tax-free allowance of £3,075.

If a settlor has set up 5 or more trusts, the exempt amount is capped at £1,200 per trust (10 or more, if for the benefit of a disabled person). Each trust would have a tax-free exemption of £1,200.

This only affects trusts set up after 7 June 1978, unless it’s a trust for a disabled beneficiary, in which case it applies to trusts set up after 9 March 1981.

Get HMRC to check the value of your asset

You can ask HMRC to check your valuation of an asset you have to pay Capital Gains Tax on. Use form CG34 Post-transaction valuation checks for capital gains.

If they agree with your valuation, they’ll not challenge your use of it in your Trust and Estate Tax Return.

Tell HMRC about capital gains made by a trust

For any UK property disposal you must report and pay Capital Gains Tax on UK property within:

• 30 days of selling it, if the completion date was between 6 April 2021 and 26 October 2021
• 60 days of selling it, if the completion date was on or after 27 October 2021

Trustees must report the disposal of any other assets in a Trust and Estate Tax Return if the:

• value of the chargeable assets disposed of is more than £50,000 (for the 2023 to 2024 tax year onwards)
• total chargeable gains before any losses are deducted are more than the annual exempt amount
• total taxable gains if there are no losses or after losses are deducted are more than the annual exempt amount — which results in a Capital Gains Tax liability
• trustees want to claim an allowable loss or make any other claim or election