Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Inheritance tax definition

What does Inheritance tax mean? Inheritance tax describes the taxation of wealth transfers on death and, in defined cases, on lifetime gifts and trust transfers. In the UK (England & Wales, Scotland and Northern Ireland), Inheritance Tax is a statutory regime under the Inheritance Tax Act 1984, charged at rates up to 40% on transfers of value. It is usually payable from the deceased’s estate by personal representatives. Lifetime charges arise on chargeable lifetime transfers (typically gifts into most trusts) and where a donor dies within seven years of a potentially exempt transfer. Key features include the nil-rate band and, where conditions are met,...

Bare trusts: inheritance tax treatment, common scenarios, exclusion from relevant property regime, PETs and estate inclusion, trustee duties and TRS

Published by a LexisNexis Private Client expert

Practice notes

This Practice Note reviews what a ‘bare trust’ means and the Inheritance tax (IHT) approach taken to these arrangements. For details on the income tax and Capital gains tax (CGT) position of a bare trust, see Practice Note: Bare trusts—income tax and CGT.

What is a bare trust?

The label ‘bare trust’ refers to an arrangement where legal title to property sits with someone other than the beneficial owner of that same property for practical purposes. The beneficiary has unfettered rights to capital and income, while the legal holder undertakes the administration and day-to-day control of the assets concerned. Some examples of when a bare trust may exist are outlined below for guidance.

Assets held for minors (children)

Bare trusts gained in popularity following significant changes to the IHT treatment of settlements made by the Finance Act 2006 (see Practice Note: Finance Act 2006 changes to trust taxation [Archived]). Minors lack legal capacity to contract or to give a valid receipt for money or property. Property which, in equity, belongs to a child must therefore be held in a trustee’s name legally...

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Paul Davies

Clarke Willmott

Paul Davies is a partner in the private client team of Clarke Willmott. He is a solicitor, a chartered tax advisor, and a member of the Society of Trust and Estate Practitioners, as well as being a chartered accountant (albeit no longer practising as such). He specialises in providing advice across the range of different tax and legal issues that face high net worth individuals, executors, and trustees.Paul's work spans all areas of private client work, including wills, trusts of all kind, inheritance tax, succession planning, probate and estate administration, and lasting powers of attorney. Paul acts as a professional trustee for a number of family trusts, and is also regularly called on to act as a professional executor....

Web page updated on 21/05/2026

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