17.03.26

With the end of the 2025/26 tax year fast approaching on 5 April 2026, now is the time to pause, review, and take stock. The weeks before the tax year end can make a meaningful difference to the Trust’s tax position and long-term planning.

Below are some key considerations before 5 April.

1. Review the Trust’s Income Position

Trusts are taxed differently depending on their type (for example, discretionary Trusts, interest in possession Trusts, or bare Trusts). If you are unsure which category your Trust falls into, this should be clarified as a priority. This primarily focuses on Discretionary Trusts.

Income from Discretionary Trusts are typically taxed at the higher rates of tax (39.35%% on dividends and 45% on all other income e.g. rental income, savings income, etc for 2025/26).

Before the end of the tax year it would be sensible to consider whether income distributions to beneficiaries are appropriate before 5 April to utilise any allowances they have e.g. personal allowance.

2. Capital Gains Tax (CGT) Planning

Trusts generally have a lower annual exemption than individuals. The annual exempt amount for Trustees is £1,500 (or £3,000 for vulnerable persons Trusts) for 2025/26. This is a “use it or lose it” exemption and cannot be carried forward.

Before the end of the tax year it would be sensible to consider the following:

• Is it appropriate to realise gains before year end to use the Trust’s annual exemption
• Is it appropriate to realise gains before year end to use any carried-forward capital losses.
• Should disposals be deferred until after 6 April
• Take advice before making capital appointments that could trigger Inheritance tax charges or CGT consequences.

3. Distributions and Beneficiary Planning

For Discretionary Trusts in particular, it would be sensible for Trustees to consider whether to:

• Distribute income before year end.
• Accumulate income within the Trust.
• Make capital appointments to beneficiaries.

When making distributions:

• Ensure the Trust deed permits the proposed action.
• Record Trustee decisions formally in minutes.
• Consider the tax position of beneficiaries (are they basic rate or higher rate taxpayers).
• Timing matters – a distribution made before 5 April falls into the 2025/26 tax year, one made after will fall into 2026/27.

4. Inheritance Tax (IHT) – Ten-Year and Exit Charges

If your Trust is a relevant property Trust (most Discretionary Trusts are), Trustees should:

• Check whether a ten-year anniversary charge is approaching.
• Review any capital distributions made during the year, as these may trigger a charge.
• Ensure valuations of Trust assets are up to date where needed.

Inheritance Tax calculations can be complex and are sensitive to historic values and prior charges. If a chargeable event is imminent, early preparation is essential.

5. Loans to or from the Trust

Where the Trust has made loans to the beneficiaries or borrowed funds (especially from the settlor), it would be sensible for the Trustees to consider:

• Whether interest is being charged at an appropriate rate.
• Whether loans should be repaid or formally documented before year end.
• Any potential tax implications of interest-free or low-interest arrangements.

Poorly documented loan arrangements can create avoidable tax and legal issues.

6. Trust Registration Service (TRS) Compliance

Trustees must ensure that the Trust’s details on the HM Revenue & Customs Trust Registration Service are:

• Up to date.
• Reflective of current Trustees, beneficiaries, and settlors.
• Amended if there have been changes during the year.

Failure to keep TRS records current can lead to penalties.

7. Record Keeping and Trustee Minutes

Good governance protects Trustees. It would be good practice to review the Trust documents before the end of the tax year to ensure:

• All decisions are properly documented via Trustee minutes and deeds where necessary.
• Professional advice is documented.
• Key deadlines (tax return filing, IHT reporting, TRS updates) are diarised.

Clear records are invaluable if decisions are later questioned by beneficiaries or by HM Revenue & Customs.

8. Looking Ahead to 2026/27

Tax rules for Trusts are complex and subject to change. Trustees should consider the changes to the tax rates and rules that will come into force from 6 April 2026 and also changes to any legislation.

Taking the changes together with anticipated income and outgoings of the Trust into consideration, it would be wise to consider whether long-term restructuring (winding up smaller Trusts, consolidating structures, etc) may be appropriate.

It would be sensible to engage early with professional advisers where significant planning is contemplated.

If you are unsure about any aspect of your Trust’s tax position, early advice is almost always more effective (and less stressful) than reactive action after the year end.

How can Renaissance Trust help?

Proactive review before the end of the tax year can prevent last-minute decisions and missed opportunities, ensure the Trust remains compliant and tax allowances are not wasted.

It also ensures beneficiaries’ interests are balanced fairly and transparently.

Our specialist team has over 35 years’ experience in the management of Trusts. If you are a Trustee, please get in touch to discuss how we can help you with end of the tax year and ensuring the timely administration of the Trust.