How does selling rental property held in a trust work?
A trust holds property for beneficiaries, with trustees as the legal owners. Landlords use trusts for estate planning, but property in most trusts faces Inheritance Tax charges every 10 years, trustees pay 24% CGT on residential gains with a reduced allowance, and a sale needs every trustee to sign.
Read more in our guide: Selling a portfolio held in a company or trust
Trust tax at a glance
| Tax | Typical position for a discretionary trust |
|---|---|
| IHT entry charge | 20% on lifetime gifts above the available nil-rate band |
| 10-year charge | Up to 6% of value above the nil-rate band |
| Exit charge | Proportion of the 10-year rate when property leaves |
| CGT rate | 24% on residential property gains |
| Annual exempt amount | Usually £1,500, half the individual amount |
| Registration | Most trusts must be on HMRC's Trust Registration Service |
Common types
- Bare trust: the beneficiary is entitled outright and is taxed as owner.
- Interest in possession trust: a beneficiary receives the rent for life or a period.
- Discretionary trust: trustees decide who benefits. Most new lifetime trusts fall under the relevant property regime.
Inheritance Tax
Putting property into a discretionary trust during your lifetime is a chargeable transfer, taxed at 20% above your nil-rate band of £325,000, which is frozen until April 2031. The trust then faces periodic charges every 10 years and exit charges when property is distributed. See Inheritance Tax for the wider picture.
Capital Gains Tax
A gain on putting a rental property into a relevant property trust can usually be held over under section 260, so the trust takes on your base cost. When trustees later sell, they pay CGT at 24% and must report and pay within 60 days of completion. The trust's annual exempt amount is £1,500, shared between trusts set up by the same settlor.
What trustees need before a sale
- The trust deed, to confirm the trustees have power to sell.
- Every trustee's signature and identity checks; see KYC checks.
- A Land Registry restriction on the title may need two trustees to give a valid receipt.
- Proof the trust is registered with HMRC.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
A trust holds property for beneficiaries, with trustees as the legal owners. Landlords use trusts for estate planning, but property in most trusts faces Inheritance Tax charges every 10 years, trustees pay 24% CGT on residential gains with a reduced allowance, and a sale needs every trustee to sign.
Possibly, if the trust deed allows it, but trustees must act in the interests of all beneficiaries and get a proper market value.
The trustees, from trust funds. For a bare trust the beneficiary is treated as owner and pays it personally.
It depends on values, timing and family needs. The entry, periodic and exit charges mean trusts rarely remove IHT completely. Take specialist advice.
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