For thirty years a Gulf family buying in London was told to hold the house through an offshore company owned by an offshore trust, keeping it out of the father’s UK estate. Since April 2017 that has not worked, and a family still paying for the structure pays for a benefit that no longer exists. UK trusts still do some valuable things; see our guide on buying through a company or in your own name.
Tax
UK trusts and London property: the honest picture for a Gulf family
What changed in April 2017 for trusts holding London homes
Since April 2017 a London home is within UK inheritance tax however it is held, so an offshore trust no longer takes the house out of the father’s estate. Instead the trust carries its own charges: up to 6 per cent of the value above £325,000 every ten years, roughly £160,000 a decade on a £3,000,000 house, plus exit charges and £5,000 to £15,000 a year to run. A trust is still worth having for succession, a child under eighteen, protection or management; for a family home the firm’s answer is usually no trust.
From 6 April 2017 UK residential property is within UK inheritance tax however it is held: directly, through a non-UK company, or through a trust that owns the company or the property. The shares of a company holding a UK home, and a loan made to buy one, are UK assets for the purpose.
The trust that used to put the house outside the estate now holds a UK asset inside its own inheritance tax regime, which, as the next section shows, is often worse than holding in the owner’s own name. A structure set up before 2017 and never reviewed is the commonest thing the firm finds in a new client’s file.
What a trust is, including the bare trust
A trust is an arrangement under which trustees hold property for beneficiaries on terms set by the person who put the property in (the settlor). A bare trust holds for a named person absolutely, who is treated as the owner for every tax; it is a nominee arrangement, used for a child under eighteen or for privacy, and carries none of the charges below.
Interest in possession and discretionary trusts explained
An interest in possession trust gives a beneficiary the right to the income or the use of the property for life. A discretionary trust gives the trustees power to decide who benefits and when. The last two, and most trusts set up for tax, are relevant property trusts and are taxed as such; a non-UK trust holding UK residential property, directly or through a company, is within that regime for the property’s value.
The three inheritance tax charges on a trust
The three inheritance tax charges a relevant property trust carries:
Inheritance tax charges on a trust holding a London home
| Charge | When | Rate on the value of UK residential property in the trust |
|---|---|---|
| Entry charge | When property, or money to buy it, is put into the trust, by a settlor whose assets are within UK inheritance tax (which UK residential property is, for anyone) | 20 per cent of the value above the settlor’s available nil-rate band (£325,000), with a further charge if the settlor dies within seven years |
| Ten-year charge | On every tenth anniversary of the trust | Up to 6 per cent of the value above the nil-rate band |
| Exit charge | When property leaves the trust | A proportion of the ten-year rate for the time since the last ten-year charge |
Source: GOV.UK, Trusts and inheritance tax; HMRC Inheritance Tax Manual IHTM04311 onwards, checked 14 October 2026.
A Gulf family that gives £3,000,000 of cash to a non-UK trust to buy a London house pays no entry charge, because the cash is not a UK asset; but from the day the trust owns the house, the ten-year and exit charges apply to its value, and the settlor’s own death may bring a charge if he retains a benefit.
The arithmetic on a £3,000,000 house
On a £3,000,000 house the ten-year charge is roughly £160,000 every decade, against nothing while the owner lives if he holds in his own name and 40 per cent above £325,000 when he dies. The arithmetic depends on how long the house is held and when deaths fall; it is a calculation, and in the firm’s experience the trust loses it more often than it wins.
Stamp duty on a trust buying London property
Stamp duty: a trust buying through its trustees pays the rates that apply to the trustees’ and beneficiaries’ residence, so the 2 per cent surcharge applies if any trustee (or, for a bare or interest-in-possession trust, any beneficiary) is non-resident, and the 5 per cent additional rate applies to a discretionary trust in any case; a corporate trustee is excluded from the 17 per cent flat company rate.
Income tax and capital gains tax on trust-held property
Income tax: rent is taxed on the trustees at the trust rate (45 per cent for a discretionary trust) or on the beneficiary for an interest in possession or bare trust, under the Non-Resident Landlord Scheme either way. Capital gains tax: a non-UK trust pays non-resident capital gains tax on the sale of UK residential property at 24 per cent, with the 60-day return, and the annual exempt amount halved.
The Annual Tax on Enveloped Dwellings applies only where a company sits in the structure, which is the usual pre-2017 arrangement.
Trust registration with HMRC and the Register of Overseas Entities
Every trust with a UK tax liability or that acquires UK land must register on HMRC’s Trust Registration Service, naming the settlor, trustees and beneficiaries; the information is not public but is available to law enforcement and, on request with a legitimate interest, to others. A corporate trustee that is a non-UK company must also register on the Register of Overseas Entities, where the trust’s existence is disclosed to Companies House though its beneficiaries are not published, as our guide on the register explains. The privacy a trust once gave has narrowed to this: the family’s names are not on the public register, and the structure’s existence is.
What a trust still does for succession and minors
Succession: property in a trust passes under the trust’s terms, not under any will or intestacy, which is the cleanest way to hold a London house for a family with children from more than one marriage, or to follow a Sharia distribution over generations. Minors: a bare trust holds a flat for a child until eighteen, with none of the charges above, and is the right answer for a flat bought for a student child, as our guide on buying for a child explains.
Protection and management through a trust
Protection: assets in a discretionary trust are not the beneficiaries’ own, which matters for a family worried about a child’s marriage, creditors or judgement. Management: trustees in London can deal with the property while the family is in the Gulf, without a power of attorney for every transaction. None of these is about tax, and each can be valued on its own.
The cost of setting up and running a trust
Setting up a non-UK trust with a corporate trustee in Jersey, Guernsey or the Isle of Man costs £10,000 to £30,000 and running it £5,000 to £15,000 a year in trustee fees, accounts, tax returns and registrations, before the ten-year charge. A UK trust with family or professional trustees costs less to set up and a few thousand a year to run. A bare trust for a child costs the declaration of trust and nothing more. The structure that was free when it saved 40 per cent now has a price, and the question is what it buys.
Our view on setting up trusts for London property
For a family home in London, own name or tenancy in common with a declaration of trust, an English will and an inheritance tax plan, as our guides on joint ownership and on wills set out; no trust. For a flat for a child, a bare trust until eighteen. For a family with a real succession or protection problem that a will cannot solve, a trust, entered with the ten-year charge modelled and accepted as the price.
What to do with a pre-2017 offshore trust structure
For a pre-2017 structure still in place, a review this year: in most cases the house should be taken out of the company and the trust, with the exit and capital gains costs calculated, because the running costs and the charges are being paid for nothing. The firm has seen families spend £15,000 a year for a decade on a structure whose only remaining function was to employ the trustee.
Sources: Trusts and inheritance tax (GOV.UK) · Register a trust as a trustee (GOV.UK) · Inheritance tax: UK residential property held indirectly (HMRC IHTM04311 onwards) · Stamp Duty Land Tax: non-UK residents, trusts (GOV.UK). Checked against HMRC’s Inheritance Tax Manual, the Trust Registration Service guidance and the stamp duty rules for trusts on GOV.UK on 14 October 2026. Set-up and running costs are indicative. General information, not tax or legal advice; a UK tax adviser and solicitor should model any trust before it is created or unwound. Figures verified 14 October 2026.
Frequently Asked
Questions about trusts and London property
Probably not for tax; it has been within inheritance tax since 2017 and pays a ten-year charge. It may still be useful for succession. Have the structure reviewed this year, with the cost of unwinding it calculated against the cost of keeping it.
A discretionary trust can, because the house is not any child’s asset; that is one of the real reasons to have one, and it comes with the ten-year charge.
No. A will directs property you own at death; a trust holds property now, under its own terms, and the property is no longer yours. The two work together and neither replaces the other.
No. From 6 April 2017 UK residential property is within UK inheritance tax however it is held: directly, through a non-UK company, or through a trust that owns the company or the property. The shares of a company holding a UK home, and a loan made to buy one, are UK assets for the purpose. The trust now holds a UK asset inside its own inheritance tax regime, which is often worse than holding in the owner’s own name.
An entry charge of 20 per cent of the value above the settlor’s available nil-rate band of £325,000 when UK property, or money to buy it, is put in, with a further charge if the settlor dies within seven years; a ten-year charge of up to 6 per cent of the value above the nil-rate band on every tenth anniversary; and an exit charge, a proportion of the ten-year rate, when property leaves the trust.
No, because the cash is not a UK asset. But from the day the trust owns the London house the ten-year and exit charges apply to its value, and the settlor’s own death may bring a charge if he retains a benefit. On a £3,000,000 house the ten-year charge is roughly £160,000 every decade, against nothing while the owner lives if he holds in his own name.
A non-UK trust with a corporate trustee in Jersey, Guernsey or the Isle of Man costs £10,000 to £30,000 to set up and £5,000 to £15,000 a year in trustee fees, accounts, tax returns and registrations, before the ten-year charge. A UK trust with family or professional trustees costs less to set up and a few thousand a year to run. A bare trust for a child costs the declaration of trust and nothing more.
Yes, for a child under eighteen. A bare trust holds the flat for the child absolutely, who is treated as the owner for every tax, and it carries none of the entry, ten-year or exit charges. It is the right answer for a flat bought for a student child, as our guide on buying for a child explains.
Only narrowly. Every trust with a UK tax liability or that acquires UK land must register on HMRC’s Trust Registration Service, naming the settlor, trustees and beneficiaries; the information is not public but is available to law enforcement and, with a legitimate interest, to others. A non-UK corporate trustee must also register on the Register of Overseas Entities. The family’s names are not on the public register; the structure’s existence is.
The rates that apply to the trustees’ and beneficiaries’ residence: the 2 per cent surcharge applies if any trustee (or, for a bare or interest-in-possession trust, any beneficiary) is non-resident, and the 5 per cent additional rate applies to a discretionary trust in any case. A corporate trustee is excluded from the 17 per cent flat company rate.
