In this section:
The rules about Capital Gains Tax for trusts are similar to those for individuals. But there are a few small differences. This guide gives a basic overview and points you towards more help.
On this page:
You work out Capital Gains Tax by:
There's more information about each of these four steps, covered in order below.
Read more about the Capital Gains Tax calculation in the guidance notes for form SA905 Trust and Estate Capital Gains.
Find form SA905 and guidance notes
Trustees can deduct certain expenses when they work out the trust's capital gains. The two most common types of expense are:
The types of expense that are allowed depend on the type of asset.
You can read more about allowable expenses on page 11 of the guidance notes to form SA905.
Find form SA905 Notes on trust and estate capital gains
There are several different reliefs available that trustees may be able to use to reduce the trust's Capital Gains Tax.
Hold-over Relief lets trustees transfer assets to beneficiaries - or other trustees in certain circumstances - without paying Capital Gains Tax. The recipient usually pays the tax when they sell or transfer the asset.
The rules for Hold-over Relief are quite complicated and they vary depending on what’s being transferred. Follow the links below for more information. Helpsheet 295 ‘Relief for Gifts and Similar Transactions’ has a form at the end for making a claim.
Find Helpsheet 295 Relief for Gifts and Similar Transactions
This relief exempts people from Capital Gains Tax when they sell or transfer their main home. For trustees it applies to any property - including up to half a hectare of land - that's owned by the trustees. The property must also be the main residence for someone entitled to occupy it under the trust's terms.
Trustees who transfer or dispose of this type of property are expected to complete the SA905, Trust and Estate capital gains supplementary pages, to claim this relief.
Download information about Private Residence Relief
Get SA905 Trust and Estate capital gains supplementary pages
Entrepreneurs' Relief lets individuals claim tax relief on capital gains up to a lifetime limit when they:
Trustees can claim this relief when a trust sells or transfers:
The limit for tax relief in the 2011-12 tax year for capital gains made is £10 million.
The trustees and the beneficiary must make a joint claim. If any gains qualify, the relief is limited to £10 million for each beneficiary. This limit is reduced by any Entrepreneurs' Relief that the beneficiary has claimed on the sale or transfer of their own assets. If the trustees claim relief it will reduce the amount of the lifetime limit available to the beneficiary for any future claims made for sales or transfers of their own assets.
If the trustees qualify for Entrepreneurs' Relief any qualifying gains up to the available lifetime limit will be charged Capital Gains Tax at 10 per cent.
Read more about Entrepreneurs Relief
As well as paying tax on gains, trustees must work out any losses from the sale or transfer of assets. They must offset these against taxable gains. If losses in any tax year are higher than that year's gains, they are carried forward and deducted from the next year's gains.
Trusts have a tax-free capital gains allowance each year - the 'annual exempt amount'. If losses brought forward reduce the capital gains of the year to this level, anything left is carried forward to the next year. You can find out more about the annual exempt amount in the section below.
In 2008-09 a trust has capital gains of £12,000 and allowable losses of £15,000. 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 £3,000 to carry forward to 2009-10.
In 2009-10 the trust has gains of £7,000 and no losses. The trustees only use £1,950 of the previous year's losses to reduce the gain to the level of the annual exempt amount - £5,050 for 2009-10. They still have £1,050 of unused losses left to carry forward to 2010-11.
You record losses, including those carried forward from previous years, on form SA905 Trust and Estate Capital Gains.
Find form SA905 Trust and Estate Capital Gains and guidance notes
The annual exempt amount lets individuals and trustees make some capital gains without paying tax.
For most trustees, the annual exempt amount for the 2011-12 tax year is £5,300. An exception to this is a trust set up for a beneficiary who is disabled. In these cases, the annual exempt amount is £10,600 - the same as for individuals. If the person who created the trust - the settlor - sets up more than one UK resident trust, including trusts of insurance policies, the trustees must divide the annual exempt amount by the number of trusts. If they have more than five, an exempt amount of £1,060 applies to each. 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.
You can find out more about who pays Capital Gains Tax when there's a trust in the guide below.
Introduction to trusts and Capital Gains Tax
Check Capital Gains Tax rates and thresholds for earlier years
Capital Gains Tax reliefs on shares
Download the Trust and Estate Tax Return, supplementary pages and help notes
