In this section:
- Introduction to Inheritance Tax and trusts
- Trusts that do and don't pay Inheritance Tax
- Inheritance Tax on transfers into trust
- Inheritance Tax due on trust ten-year anniversaries
- Inheritance Tax on assets transferred out of trust
- Inheritance Tax and trusts following a death
- Completing form IHT100 Inheritance Tax Account
Inheritance Tax due on ten-year anniversaries
Inheritance Tax is due on assets within certain trusts at each ten-year anniversary. This guide explains which trusts the charge applies to and when you need to pay this charge. It also tells you what information you need to do the calculation yourself and how your Tax Office can help.
On this page:
- What is the ten-year anniversary charge?
- What is a relevant property trust?
- Working out what Inheritance Tax is due
- Doing the anniversary charge calculation yourself
- Getting HMRC to do the calculation for you
- More useful links
What is the ten-year anniversary charge?
As a trustee, you may have to pay a regular charge on every tenth anniversary of the date your trust was set up, if both of the following apply:
- the value of your trust is above the Inheritance Tax threshold (£312,000 for the tax year 2008-09)
- your trust is a ‘relevant property trust’
The ten-year charge is also known as the ‘principal charge’ or ‘periodic charge’.
What is a relevant property trust?
A relevant property trust is any trust that is not one of the following:
- an immediate post-death interest
- a transitional serial interest
- a disabled person’s interest
- a trust for a bereaved minor
- an age 18 to 25 trust
- an interest in possession (before 22 March 2006)
You can read about how Inheritance Tax applies to the above trusts in our guide below.
Trusts that do and don’t pay Inheritance Tax
Working out what Inheritance Tax is due
Assets that are placed in - or ‘settled into’ - a relevant property trust are often referred to as ‘relevant property’. Inheritance Tax is charged at each ten-year anniversary on the value - after allowing for any business or agricultural relief - of any relevant property in the trust on the day before that anniversary.
The calculation for the ten-yearly charge is complicated. Before you can begin, you will need to know the following information:
- the value of the relevant property in the trust on the day before the ten-year anniversary
- the value - at the date it entered the trust - of any trust property that has not at any time been relevant property while remaining in this trust
- the value of all other transfers into other trusts made by the settlor on the same day as the trust in question was set up, valued at the date they were added
- the value of all other transfers chargeable to Inheritance Tax that the settlor made in the seven years before the trust in question was set up, valued at the date they were made (whether into trusts or not)
- the value of any transfers out of the trust within the last ten years on which an exit charge has been paid
Once you have this information there will be a different calculation depending on whether:
- all of the relevant property has been in the trust for more than ten years
- some of the relevant property has not been in the trust for ten years at the time of a trust ten-year anniversary
- the trust was, at some point in the last ten years, a different kind of trust that was not liable to relevant property charges, eg an accumulation and maintenance trust
You can read more about how Inheritance Tax applies to relevant property trusts in our guide below.
Trusts that do and don’t pay Inheritance Tax
Doing the anniversary charge calculation yourself
You will need to declare and pay most Inheritance Tax charges incurred by your trust using form IHT100 Inheritance Tax Account. If you want to do the calculations yourself, you need to enter your figures into Sections G and H of form IHT100.
HM Revenue & Customs (HMRC) publishes a calculation worksheet that includes guidance notes to help you work out how much Inheritance Tax you will need to pay on:
- transfers into trust
- transfers out of trust
- trust ten-year anniversaries
To calculate the anniversary charge, you will need to use section B of form IHT100WS Inheritance Tax worksheet. You can get further help filling in this section of the worksheet with part B of the guide IHT113 ‘How to fill in form IHT100WS’.
Download form IHT100WS Inheritance Tax worksheet (PDF 210K)
Download form IHT113 ‘How to fill in form IHT100WS’ (PDF 160K)
Getting HMRC to do the calculation for you
If you want HMRC to calculate the anniversary charge for you, fill in form IHT100 leaving sections G and H blank. You will need to ensure you return the form to the Inheritance Tax Office in Nottingham in good time for the calculation to be worked out - otherwise you may incur a penalty charge.
Please note, whether you do the calculation yourself or whether HMRC does it, you will still need to complete an event form IHT100d for the ten-year anniversary - in addition to the main form IHT100.
Find out more about completing form IHT100 Inheritance Tax Account
Find out about paying Inheritance Tax
Contact the Inheritance Tax Office in Nottingham
Get form IHT100 Inheritance Tax Account, guidance and supplementary pages
