Trusts

• A trust holding assets qualifying for 100% APR and/or 100% BPR will have its own £2.5m relief allowance (in the context of the 10-year anniversary (TYA) and exit charge regime applicable to most trusts).  However, this is subject to the anti-fragmentation measure outlined below.
• Multiple trusts funded by same settlor on or after 30 October 2024 will share a single £2.5m relief allowance (applied in chronological order until used up or apportioned for same-day transfers).
• The rate of tax applicable to TYA and exit charges will continue to be a maximum of 6%.
• Under the new regime, the rate of charge on exit (up to a maximum of 6%) will be calculated by reference to the unrelieved value of qualifying assets whether the exit is before or after the first TYA (whereas this principle is currently in operation only in relation to exits prior to the first TYA).
• Exits between TYAs will eat into the relief allowance available at the next TYA, except those occurring in the first quarter after either commencement of a settlement or a TYA, which will not disturb the trust’s relief allowance.
• If there are multiple exits during a 10-year period, then the relief is applied cumulatively reducing the maximum allowance that is available at the next TYA.
• After the TYA, the trust’s relief allowance refreshes and is available again to be used against exit charges over the next ten years, and so on.
• Different rules apply to certain special types of trust:

○ Each beneficiary of a trust which qualifies as an ‘18-25 trust’ will have their own £2.5m allowance to prevent unfairness in respect of later distributions. ○ Other special trusts (including temporary charitable trusts and employee benefit trusts) will be subject to the £2.5m relief allowance for exit charges from 6 April 2026 but the allowance will not refresh every 10 years (as they are not subject to TYA charges).