Trust structures as a strategy to optimise CGT

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You’ve sold a property and made good money. Then the tax bill comes – and it’s huge. Sound familiar?

Many property owners don’t know about capital gains tax trusts UK rules that could save them thousands. Let’s look at how you can use trusts to pay less tax on your property profits.

What Is Capital Gains Tax?

When you sell a property for more than you paid, you make a capital gain. The government taxes this profit – that’s Capital Gains Tax (CGT).

For 2025-26, you pay:

• 18% CGT if you’re a basic rate taxpayer
• 24% CGT if you’re a higher rate taxpayer

The first £3,000 of gains each year is tax-free (your annual allowance).

How Capital Gains Tax Trusts UK Work

A trust is like a box that holds your property. You put the property in the box, and trustees look after it for you and your family.

Here’s the key part: when you put property into a trust using the right method, you might not have to pay CGT straight away. The tax gets delayed until the trust sells the property later.

Three Ways to Use Trusts for CGT

1. Holdover Relief – Delay Your Tax Bill

This is the most useful trick. When you give property to a trust, you can choose “holdover relief.” This means:

• You don’t pay CGT now
• The trust takes over your original buying price
• CGT only gets paid when the trust sells the property

Example: You bought a house for £100,000. It’s now worth £200,000. Instead of paying CGT on £100,000 profit now, you put it in a trust with holdover relief. No tax to pay today – the trust will pay CGT when it sells later.

2. Use Multiple Annual Allowances

Each trust gets its own £1,500 tax-free allowance each year. If you have more than one trust, you can use multiple allowances.

Your family members also get their own £3,000 allowances. The trust can give property to family members who then sell it using their allowances.

3. Time Your Sales Better

Trusts give you more control over when to sell. You can:

• Wait for years when you have lower income (and pay less CGT)
• Spread sales over several years
• Sell when CGT rates might be lower

Real Example: How Sarah Saved £30,000

Sarah owns three rental properties. She bought them for £150,000 each. They’re now worth £250,000 each – that’s £300,000 total profit.

If Sarah sells all three herself, she pays 24% CGT = £72,000 tax bill.

Instead, Sarah:

1. Puts properties in a family trust using holdover relief
2. Trust gives one property each to her two adult children
3. Children sell using their £3,000 allowances and lower tax rates
4. Total tax bill drops to around £42,000

Sarah saves £30,000 in tax.

Types of Trusts for Property

Discretionary Trusts

The trustees decide who gets what and when. This gives you the most flexibility. Good for:

• Families with young children
• When you’re not sure who should inherit what
• Maximum tax planning options

Interest in Possession Trusts

One person gets the income (like rent) but not the property itself. Good for:

• Providing income to a spouse
• Keeping property in the family
• Simpler tax rules

When Trusts Make Sense

Capital gains tax trusts UK strategies work best if you:

• Own multiple properties
• Have large profits on your properties
• Want to pass wealth to family
• Pay higher rate tax
• Plan to keep properties long-term

Trusts might not help if you:

• Only own one property
• Need money quickly
• Want simple arrangements
• Have small profits

The Costs and Downsides

Setting up trusts costs money:

• £1,000-£3,000 to set up properly
• £500-£1,500 each year for paperwork and tax returns

Other things to consider:

• Trusts pay 24% CGT (might be higher than your personal rate)
• Some mortgage lenders don’t like trusts
• More paperwork and rules to follow
• Properties must leave the trust after 80 years

Step-by-Step: How to Use a Trust for CGT

1. Work out your CGT bill – Calculate profit on each property
2. Get professional advice – Tax rules are complex
3. Choose the right trust type – Discretionary or interest in possession
4. Set up the trust properly – Use a solicitor for the legal paperwork
5. Transfer property using holdover relief – Avoid immediate CGT
6. Plan when to sell – Use the trust’s flexibility for better timing

Important Tax Deadlines

If a trust sells UK property, trustees must:

• Report the sale within 60 days
• Pay any CGT due within 60 days
• File annual tax returns

Miss these deadlines and face penalties.

Getting Help

Capital gains tax trusts UK rules change often and can be tricky. Get advice from:

• A chartered accountant who knows property tax
• A solicitor who understands trusts
• A financial planner for overall strategy

The money you save often pays for professional advice many times over.

Is a Trust Right for You?

Ask yourself:

• Do I have properties worth over £100,000 profit?
• Do I want to pass wealth to family?
• Can I afford the setup and running costs?
• Am I comfortable with more complex arrangements?

If you answered yes, a trust could save you thousands in CGT.

Your Next Steps

1. Add up the profits on all your properties
2. Calculate what CGT you’d pay if you sold today
3. Speak to a property tax specialist about trust options
4. Get quotes for setting up a trust
5. Compare the costs with potential tax savings

Don’t let a big CGT bill eat into your property profits. With the right planning, capital gains tax trusts UK strategies can help you keep more of what you’ve earned.

Want to explore how a trust could cut your CGT bill? Let’s discuss your property portfolio and see how much you could save.

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Simple Questions and Answers

How much CGT can I save with a trust?

It depends on your situation. Some people save 30-50% of their CGT bill. Others save less. A property tax specialist can estimate your savings.

Can I still live in a property that’s in a trust?

Usually no. Once property goes in a trust, you can’t treat it as your main home. There are some exceptions, so get advice.

What happens if I die and my property is in a trust?

The trust continues without you. Your trustees keep managing it according to your instructions. This is actually one of the benefits.

Can I change my mind and take property out of a trust?

It depends on the trust type. Some allow this, others don’t. This is why choosing the right trust type matters.