If you are wondering how to set up a trust fund in the UK, this guide walks you through the full process in plain English. A trust fund is a legal arrangement that lets you protect assets, support chosen beneficiaries and pass wealth on in a structured way. With the new inheritance tax rules that took effect on 6 April 2026, the way trusts are taxed has changed in important ways, so getting up to date guidance matters more than ever.
By the end of this guide you will know which type of trust may suit you, what setting one up actually involves, what it can cost, and what the latest 2026 tax rules mean for your planning.
In a nutshell:
- Setting up a trust fund involves choosing the trust type, picking trustees, naming beneficiaries and signing a trust deed.
- The main UK trust types are bare, interest in possession, discretionary, accumulation and mixed trusts.
- From 6 April 2026, agricultural and business assets get 100% IHT relief up to £2.5 million per person, with 50% relief above that.
- Trusts must usually be registered with HMRC’s Trust Registration Service (TRS), even when no tax is due.
- Costs typically run from around £500 to £5,000+ depending on complexity, with ongoing administration on top.
Trust Fund Basics
What is a trust fund?
A trust fund is a legal arrangement in which a trustee holds and manages assets for one or more beneficiaries, following the instructions in a trust deed. The trustee can be an individual, a group of individuals or a professional trustee company.
Trust funds can hold a range of assets, including property, land, shares, investments and cash. They are often used to provide for young children, manage wealth across generations, or support someone who may not be able to manage assets on their own.
Who is involved in a trust?
Every trust has three core roles:
| Role | What they do |
|---|---|
| Settlor | The person who places assets into the trust and sets out its purpose. |
| Trustee | Manages the trust assets, follows the trust deed, makes investment decisions, keeps records and meets tax obligations. |
| Beneficiary | The person or entity who benefits from the trust, by receiving income, capital, or both. |
Beneficiaries may pay income tax on amounts they receive, depending on their personal tax position.
Types of Trusts in the UK
There are several trust structures available, and the right one depends on your goals.
Quick comparison
| Trust type | Best for | Key feature |
|---|---|---|
| Bare trust | Passing assets to a child or grandchild | Beneficiary gets full control at 18 (England and Wales) |
| Interest in possession | Providing income to one person while protecting capital for another | Income paid to a named beneficiary as it arises |
| Discretionary | Flexible family planning, asset protection | Trustees decide who gets what and when |
| Accumulation | Long term growth | Income is reinvested rather than paid out |
| Mixed | Tailored, multi purpose planning | Combines elements of two or more trust types |
Bare trusts
Bare trusts are the simplest form. The named beneficiary has an absolute right to the trust assets and any income, and takes full control once they reach 18 in England and Wales.
These are often used to pass assets to younger family members. Tax treatment, including any capital gains tax position, depends on the assets being transferred and your personal circumstances, so it is worth getting tailored advice before you transfer anything.
Interest in possession trusts
These give a named beneficiary the right to receive income from the trust assets, while the underlying capital is preserved for someone else. The trustee passes the income on as it arises, and the beneficiary pays income tax on what they receive. The inheritance tax position depends on when and how the trust was set up.
Discretionary trusts
Discretionary trusts give trustees the freedom to decide how, when and to whom income or capital is paid. This is useful where beneficiaries’ needs may change over time or where you want flexibility built in. Trustees use their judgement in line with the trust deed and any letter of wishes.
Accumulation trusts
These let trustees retain and reinvest income within the trust, helping the value grow over time. They are often used in long term planning for children or future generations.
Mixed trusts
Mixed trusts combine features of two or more trust types. For example, one part may pay income to one beneficiary while another part accumulates capital for someone else. Each part is taxed under its own rules, so professional advice is particularly valuable.
Other categories to be aware of
- Settlor interested trusts — where the settlor or their spouse can benefit. Special tax rules apply.
- Non resident trusts — where the trustees are based outside the UK. These have their own complex tax treatment.
How to Set Up a Trust Fund (Step by Step)
Setting up a trust fund involves five main steps:
- Decide on the type of trust — based on your goals and family situation.
- Identify the assets — property, cash, investments, land or shares. Each needs to be clearly listed and valued.
- Choose your trustees — usually at least two, for continuity and balanced decision making.
- Identify your beneficiaries — clearly named in the deed to reduce future disputes.
- Draft and sign the trust deed — the legal document that governs the whole arrangement.
What goes into a trust deed?
A properly drafted trust deed typically sets out:
- The purpose of the trust
- The assets included
- The beneficiaries
- The trustees’ powers and responsibilities
- How income and capital are to be distributed
- What happens if a trustee or beneficiary dies
A poorly drafted deed is one of the most common reasons trusts run into trouble later, so this is the step where professional drafting really pays off.
Don’t forget the Trust Registration Service
Most UK trusts now need to register with HMRC’s Trust Registration Service (TRS). Since 2022, even many non-taxable trusts have to be on the register. Your solicitor or accountant can usually handle this for you; expect a modest additional fee for the work.
How Much Does It Cost to Set Up a Trust Fund?
Costs vary widely depending on the type of trust, the assets involved and the experience of your adviser.
Typical fee ranges in 2026
| Cost item | Typical range |
|---|---|
| Simple trust setup | £500 – £1,500 + VAT |
| Discretionary or property trust | £1,500 – £5,000+ + VAT |
| Trust Registration Service handling | £200 – £500 |
| Ongoing accountancy / tax returns | £300 – £1,500 a year |
| Professional trustee fees (if used) | £500 – £5,000+ a year |
You may also have separate costs such as Land Registry fees if property is being transferred, and potentially stamp duty land tax (SDLT) depending on how the transfer is structured. Getting a clear, written quote up front avoids surprises later.
Tax Considerations You Need to Know
Trusts can be subject to income tax, capital gains tax and inheritance tax, depending on the structure and what the trustees do with the assets.
Inheritance tax: the key points
Inheritance tax is the area where most people focus, and where the rules are most often misunderstood. The headline points are:
- Entry charge: Transfers into many trusts (known as Chargeable Lifetime Transfers) above the £325,000 nil-rate band can be subject to a 20% inheritance tax charge at the time the trust is set up.
- Ten year anniversary charges: Many trusts face a periodic charge of up to 6% on the value of relevant property every ten years.
- Exit charges: When assets leave the trust, an exit charge may apply.
- The 7 year rule: If the settlor survives seven years after making certain gifts, those gifts may fall outside the estate. However, this is more nuanced for trusts than for direct gifts. Multiple trust transfers within seven years can interact and create what is sometimes called the 14 year rule, where earlier transfers affect the tax on later ones.
It is a common misconception that putting assets into a trust automatically removes them from inheritance tax. The reality is more nuanced and depends on the type of trust and the value involved, which is why bespoke advice matters.
What changed on 6 April 2026
Following the 2024 Autumn Budget and updates through 2025, the inheritance tax landscape changed significantly from 6 April 2026. The reforms mainly affect business owners, farmers, family companies and trusts holding qualifying property.
Key points under the new regime:
- The first £2.5 million of combined agricultural and business property continues to receive 100% relief, with 50% relief on amounts above £2.5 million.
- The £2.5 million allowance is transferable to a surviving spouse or civil partner, so married couples may potentially pass on up to £5 million of qualifying assets at the higher rate of relief.
- For trusts, each trust will have its own 100% relief allowance, but where a settlor has created multiple trusts after 30 October 2024, the £2.5 million allowance will be shared across trusts created after this date. Trusts created before that date may each retain a separate allowance, subject to detailed transitional rules.
- Looking ahead, from April 2027, most unused pension funds will be included in the estate for IHT purposes, with no BPR or APR available, prompting many families to revisit how pensions, trusts and wills work together.
If you already have a trust, or are planning to set one up, reviewing your position with a qualified adviser under these new rules is strongly recommended.
Managing a Trust Fund
Once the trust is in place, the trustees take over day to day responsibility.
Trustee duties at a glance
- Act in the best interests of the beneficiaries
- Follow the trust deed carefully
- Manage investments prudently
- Keep accurate financial records
- File tax returns and meet HMRC deadlines
- Avoid conflicts of interest
- Document key decisions
Reviewing your trust regularly
Trusts should be reviewed periodically to reflect changes in legislation, family circumstances and financial goals. Given the scale of the 2026 reforms, a review is particularly worthwhile right now.
Benefits of Setting Up a Trust Fund
A well structured trust fund can offer real practical advantages:
- Asset management across generations. Wealth is preserved and passed on according to your specific wishes.
- Support for vulnerable family members. A properly drafted trust can provide structured, ongoing support for someone who needs help managing money or who requires long term care.
- Control over distributions. You can decide when and how beneficiaries receive assets, rather than handing everything over at once.
- A degree of asset protection. Trusts can offer some protection from certain risks, although this depends on how and when the trust is set up. Transfers made to deliberately avoid existing creditors or known claims can be challenged in court, so trusts should always be set up well in advance of any anticipated issue.
- Inheritance tax planning. Used correctly, and within the new 2026 framework, trusts remain a valid part of many families’ estate planning strategies.
Common Mistakes to Avoid
- Skipping the planning stage. Without clear objectives, a trust can produce unexpected outcomes.
- Choosing the wrong trustees. Pick people who are reliable, organised and have the time to take on the role.
- Underestimating ongoing costs. Setup is only the start; budget for tax returns, accountancy and reviews.
- Forgetting the Trust Registration Service. Failure to register can lead to penalties.
- Assuming the 7 year rule means automatic IHT exemption. It does not, especially for transfers into trust.
- Not reviewing after major changes. With the 2026 reforms now in force, plans drawn up before the Budget may no longer work as intended.
Frequently Asked Questions
How long does it take to set up a trust fund in the UK?
A straightforward trust can usually be set up within a few weeks once instructions are given. More complex arrangements involving property or business assets can take longer.
Can I be a trustee and a beneficiary of my own trust?
Yes, in some structures, but this is treated as a “settlor interested” trust and has its own tax rules. Always take advice before doing this.
Do all UK trusts need to register with HMRC?
Most UK express trusts now need to register with the Trust Registration Service, even if no tax is due. There are limited exceptions.
Is a trust fund worth it for a smaller estate?
For very small estates the cost and complexity may outweigh the benefit. For estates approaching or above the inheritance tax thresholds, or where there are vulnerable beneficiaries, a trust often makes good sense.
Can a trust still help me reduce inheritance tax after the 2026 changes?
In many cases yes, but the new £2.5 million cap and the rule on multiple trusts created after 30 October 2024 mean planning needs to be more carefully tailored than before.
Summary
Setting up a trust fund in the UK in 2026 takes careful planning, the right professional advice and ongoing management. When it is structured correctly, a trust can help manage wealth across generations, support people who need it most and form part of a wider inheritance tax strategy.
By understanding the trust types, the responsibilities involved, the realistic costs and the latest 2026 tax rules, you can put a trust in place that genuinely supports your goals and your family’s future.
Speak to an expert
If you would like tailored guidance on setting up a trust fund, registering an existing trust, or reviewing your structure under the new 2026 inheritance tax rules, our team at Stamp Duty Land Tax Experts can help. Get in touch for a confidential consultation.