Capital Gains Tax Rates for Trusts: UK Guide for 2026/27

Capital gains tax rates for trusts are important for trustees managing property, shares and other chargeable assets. A trust can create Capital Gains Tax (CGT) liabilities when trustees sell or transfer assets, distribute assets to beneficiaries or otherwise make a disposal for CGT purposes.

For the 2026/27 tax year, trustees generally pay Capital Gains Tax at 24% on taxable gains after allowable costs, losses, reliefs and the trust’s available Annual Exempt Amount have been taken into account. Wider personal tax planning for trusts can help ensure CGT is considered alongside the other tax consequences of managing and transferring trust assets.

Understanding Capital Gains Tax and trusts is particularly important because the rules governing trustees differ from those applying to individuals. The person responsible for a gain can also depend on the type of trust and how an asset is transferred.

How Capital Gains Tax on Trusts Works

A trust is a legal arrangement under which trustees manage assets for one or more beneficiaries according to the terms of the trust. The person who establishes the trust and provides assets is generally known as the settlor. Understanding how trusts work in the UK with London tax guidance can help clarify the roles of settlors, trustees and beneficiaries before considering their respective tax responsibilities.

For CGT purposes, trustees can be treated as disposing of an asset when they sell it, transfer it or distribute it to a beneficiary. A disposal can therefore create a taxable gain even where the trustees do not receive cash from an ordinary commercial sale.

HMRC calculates trust capital gains taxation separately for each tax year. Trustees broadly calculate the gain or loss on each disposal, deduct allowable losses and relevant reliefs, and then apply any available Annual Exempt Amount.

Capital Gains Tax Trust Rate for 2026/27

The standard capital gains tax trust rate for trustees is 24% for disposals during 2026/27.

This rate applies to taxable gains after allowable losses, costs, reliefs and the trust’s Annual Exempt Amount have been considered.

These figures are important when estimating the potential tax cost before trustees dispose of a significant trust asset. Trusts holding agricultural or business property should also consider the APR and BPR changes in London when reviewing the wider tax consequences of retaining or transferring those assets.

Annual CGT Exemption for Trusts

Most trustees receive a lower Annual Exempt Amount than individuals.

For 2026/27, the Annual Exempt Amount is:

• £1,500 for most trusts.
• £3,000 where the relevant conditions for a vulnerable beneficiary are satisfied.

This means a trust with net chargeable gains within its available exemption may have no CGT to pay for that year.

However, the allowance can be reduced where the same settlor has created multiple qualifying trusts. Broadly, the available trust exemption can be divided between settlements, subject to the relevant statutory rules. Trustees managing several trusts created by the same settlor should therefore not automatically assume that each trust receives the full £1,500 allowance.

When Does Capital Gains Tax Arise in a Trust?

Capital Gains Tax on trusts can arise in several situations. A straightforward example is where trustees sell an investment or property for more than its allowable acquisition cost.

CGT can also become relevant when:

• Trustees transfer or distribute assets to beneficiaries.
• An individual’s entitlement to trust property changes.
• Certain assets are transferred into a trust.
• Trustees exchange or otherwise dispose of chargeable assets.
• Certain interests under a settlement come to an end.

The tax treatment depends on the legal structure of the trust and the nature of the transaction. Where the trust holds business interests, IHT Business Relief eligibility should also be reviewed separately to establish whether those assets may qualify for Inheritance Tax relief. Trustees should therefore establish whether a CGT disposal occurs before assuming that tax only arises when an asset is sold for cash.

What Happens When Assets Are Put Into a Trust?

Transferring an asset into a trust can amount to a disposal for Capital Gains Tax purposes.

Where a settlor transfers an asset to trustees, the settlor may therefore realise a chargeable gain based on the relevant CGT valuation rules. This can occur even though the settlor has gifted the asset rather than sold it commercially.

Depending on the circumstances, Hold-Over Relief may be available to defer some or all of the gain. Instead of CGT becoming immediately payable, the gain is effectively deferred and reflected in the recipient’s acquisition value.

Whether relief is available depends on the nature of the asset, trust and transfer, so it should not be assumed to apply automatically.

What Happens When Assets Leave a Trust?

When trustees transfer assets to a beneficiary, the transfer can also constitute a disposal for CGT purposes.

The trustees may therefore have to calculate a gain based on the market value of the asset at the relevant time, even where the beneficiary does not pay the trustees for it.

Hold-Over Relief may sometimes allow the gain to be deferred. Where the necessary conditions are satisfied, the trustees may pay no immediate CGT and the deferred gain is effectively passed to the recipient.

This makes the timing and structure of trust distributions particularly important where a trust contains assets that have substantially increased in value. Where those assets include qualifying agricultural property, Agricultural Property Relief guidance can also help trustees understand the separate Inheritance Tax implications.

How Are Bare Trusts Treated for Capital Gains Tax?

Bare trusts are treated differently from many other trust structures.

Where a beneficiary is absolutely entitled to trust property, transactions undertaken by the trustee can generally be treated for CGT purposes as transactions undertaken by the beneficiary.

The beneficiary, rather than the trustee, may therefore be responsible for Capital Gains Tax arising from the underlying asset.

This is why trustees should identify the type of trust before applying the standard 24% trustee CGT rate. For comparison, discretionary trust tax guidance in London can help trustees understand how a discretionary arrangement differs from a bare trust and why the trust structure matters for taxation.

Capital Gains Tax Reliefs Available to Trustees

Several reliefs can potentially reduce or defer Capital Gains Tax on trusts, depending on the circumstances.

Hold-Over Relief

Hold-Over Relief can defer CGT when qualifying assets are transferred to beneficiaries or, in certain circumstances, between trustees. The recipient generally takes on the deferred gain, which may become taxable when they later dispose of the asset.

Private Residence Relief

Trustees may qualify for Private Residence Relief where a property is occupied as a main residence by a person who is entitled to live there under the terms of the trust and the relevant conditions are satisfied.

Business Asset Disposal Relief

Trustees may qualify for Business Asset Disposal Relief in specific circumstances involving qualifying business assets or shares connected with a beneficiary’s business. Where business assets are held within the trust, Business Relief for Inheritance Tax may also need to be considered separately as part of the trust’s wider tax position.

From 6 April 2026, qualifying gains subject to Business Asset Disposal Relief are taxed at 18% rather than the standard trustee rate of 24%.

Vulnerable Beneficiary Treatment

Special CGT treatment can apply to qualifying trusts for vulnerable beneficiaries. Where the necessary election and conditions are satisfied, the trustees may effectively be taxed by reference to the amount that would have arisen if the gains had been taxed on the vulnerable beneficiary directly.

How Trustees Calculate Capital Gains Tax

The calculation generally starts with each disposal made during the tax year.

Trustees should:

1. Calculate the gain or loss arising on each disposal.
2. Deduct qualifying acquisition and disposal costs.
3. Deduct allowable capital losses for the year.
4. Consider unused allowable losses brought forward from previous years.
5. Apply relevant CGT reliefs.
6. Deduct the trust’s available Annual Exempt Amount.
7. Apply the appropriate capital gains tax trust rate to the remaining taxable gain.

Accurate records are particularly important where assets have been held by a trust for many years because original acquisition values, improvements and previous transactions may affect the calculation.

Example of Capital Gains Tax for a Trust

Assume a trust makes a chargeable gain of £20,000 during 2026/27 and has no allowable losses or other CGT reliefs available.

If the trust qualifies for the standard £1,500 Annual Exempt Amount:

• Chargeable gain: £20,000.
• Annual Exempt Amount: £1,500.
• Taxable gain: £18,500.
• CGT at 24%: £4,440.

This simplified example demonstrates why trustees should consider the potential CGT liability before disposing of valuable trust assets. Actual calculations can differ where losses, multiple settlements or specific reliefs apply.

Reporting Capital Gains Tax to HMRC

Trustees are responsible for identifying, calculating and reporting taxable gains arising within the trust where they are the person chargeable to CGT.

Trustees may need to report gains through the trust’s Self Assessment return and complete the relevant trust and estate capital gains supplementary pages. Trustees should also check the trust registration requirements in London, as many UK express trusts must be registered with HMRC separately from their CGT reporting obligations.

Additional reporting requirements and payment deadlines can apply to certain disposals, particularly disposals of UK property. Trustees should therefore establish the applicable reporting route and deadline when the disposal occurs rather than waiting until the trust’s annual return is prepared.

Records Trustees Should Keep

Trustees should maintain sufficient records to support the CGT calculation and any relief claimed.

Relevant records can include:

• Purchase and sale contracts.
• Original acquisition costs.
• Professional and transaction fees.
• Evidence of qualifying capital improvements.
• Asset valuations.
• Details of previous transfers.
• Records of allowable capital losses.
• Documentation supporting any CGT relief claimed.

Trustees should also retain evidence supporting market valuations where assets are transferred rather than sold on the open market.

Common Capital Gains Tax Mistakes for Trusts

• Using the individual’s £3,000 Annual Exempt Amount instead of the standard £1,500 trust allowance.
• Using outdated trustee CGT rates.
• Assuming a gift or distribution to a beneficiary cannot create a disposal.
• Failing to consider whether the trust’s exemption is reduced because the settlor created multiple trusts.
• Assuming Hold-Over Relief applies automatically.
• Treating bare trusts in the same way as discretionary trusts.
• Failing to obtain appropriate valuations for non-commercial transfers.
• Missing reporting requirements following a disposal of UK property.

Review Capital Gains Tax Before Trust Assets Are Transferred

The current capital gains tax rates for trusts mean that disposing of appreciated trust assets can create a significant tax liability. For 2026/27, most trustees have an Annual Exempt Amount of only £1,500 and generally pay CGT at 24% on taxable gains above the available exemption.

Trustees should therefore review the CGT position before selling, gifting or distributing substantial assets. The type of trust, available losses, the beneficiary’s position and potential reliefs can all affect the eventual liability.

Careful consideration of Capital Gains Tax and trusts before a transaction takes place can also identify whether relief is available and ensure that trustees meet their reporting and record-keeping responsibilities.

Disclaimer: This article provides general information about Capital Gains Tax and trusts for the 2026/27 tax year. The treatment of individual trusts depends on their terms, residence, beneficiaries, assets and specific transactions.

Case Study: Reviewing CGT Before Distributing a Trust Investment

Helen approached our Fulham office in her capacity as trustee of a family discretionary trust. The trust held an investment portfolio that had increased substantially in value, and the trustees were considering transferring some of the investments directly to an adult beneficiary. They initially assumed that no Capital Gains Tax would arise because the assets were being distributed rather than sold.

Cigma Accounting reviewed the original acquisition costs, current market values and previous capital losses available to the trust. We explained that transferring an appreciated asset to a beneficiary can still constitute a disposal for CGT purposes and may require the trustees to calculate the gain using the relevant market value.

We then estimated the taxable gain after considering allowable costs, available losses and the trust’s Annual Exempt Amount. With the standard trustee CGT rate at 24% for 2026/27, the proposed distribution could have created a significant immediate liability.

Before the transfer proceeded, we also considered whether Hold-Over Relief might be available. We explained that the relief is subject to qualifying conditions and should not simply be assumed, but where available it can defer rather than eliminate the gain.

As part of the wider review, Cigma Accounting considered the trust’s tax return, investment taxation, trust accounting and Inheritance Tax position. This gave the trustees a clearer understanding of both the immediate CGT consequences and the wider reporting responsibilities associated with distributing trust assets.

Helen and the other trustees could then make their decision with a clearer estimate of the potential tax liability, the reliefs requiring consideration and the records and valuations needed to support the eventual treatment.