When a property left in trust is sold, the trustees pay Capital Gains Tax on the rise in value since the date of death, at 24% after the trust’s £1,500 annual exempt amount. The trust’s base cost is the probate value, not what the person who died paid. CGT can also arise when the property leaves the trust and passes to a beneficiary, although reliefs often reduce or defer the bill.
Wills often leave the family home or a rental property in trust, for example to let a surviving partner live there for life, or to protect young or vulnerable beneficiaries. How a property left in trust is taxed depends on the type of trust and who lives there. HMRC’s starting point is its guidance on trusts and Capital Gains Tax.
This guide covers CGT on a property left in trust in 2026/27, including the main trust types, the rates and allowances, Private Residence Relief, a worked example and what happens when the trust ends.
Is CGT Due When a Property Is Left in Trust by Will?
No. A property left in trust through a will passes into the trust on death without any CGT charge. The trustees acquire it at its market value at the date of death, usually the probate value. Our guide to probate value and CGT explains why that figure matters.
CGT only arises later, when the trustees:
- Sell the property for more than its probate value.
- Transfer it to a beneficiary, which is treated as a disposal at market value.
- End the trust, so a beneficiary becomes absolutely entitled to the property.
Lifetime trusts work differently, because putting a property into a trust while you are alive is itself a disposal. See our guide to CGT when you put assets into a trust.
How Each Type of Trust Is Taxed
| Type of trust | Who pays CGT on a sale | Key points |
|---|---|---|
| Bare trust | The beneficiary | Treated as owned by the beneficiary, who uses their own £3,000 allowance and rates |
| Life interest (interest in possession) trust | The trustees | No CGT when the life tenant dies; the property gets a new market value base cost |
| Discretionary trust | The trustees | 24% rate and £1,500 allowance; holdover relief may apply when property is appointed out |
| Trust for a vulnerable or disabled beneficiary | The trustees | Full £3,000 allowance, and tax can be worked out at the beneficiary’s own rates if an election is made |
CGT Rates and Allowances for Trustees in 2026/27
Trustees pay CGT at 24% on gains above their annual exempt amount. The trust allowance is £1,500 for 2026/27, half the £3,000 an individual gets. If the same person set up several trusts, the allowance is shared between them, down to a minimum of £300 each. A trust for a disabled beneficiary gets the full £3,000.
By comparison, a beneficiary who owns the property personally pays 18% on gains within their unused basic rate band and 24% above it. See our guides to CGT rates for 2026 and the annual exempt amount.
Private Residence Relief for a Property Left in Trust
Trustees can claim Private Residence Relief when they sell a property left in trust, if it was the only or main home of a beneficiary entitled to live there under the terms of the trust. This is common where a will lets a surviving spouse or partner stay in the family home for life.
The relief works in the same way as for an individual, with time apportionment for any months the property was not that beneficiary’s main home and the final nine months always exempt. Our guide to Private Residence Relief explains the calculation.
There is one important restriction. Relief is not available to trustees if holdover relief was claimed on the property when it went into the trust or when it was transferred to them.
Worked Example: Trustees Selling a Rental Property
A will left a buy-to-let flat in a discretionary trust for the deceased’s grandchildren. It was valued at £400,000 for probate. Three years later the trustees sell it for £460,000, paying £8,000 in agent and legal fees. No beneficiary lived there.
| Step | Amount |
|---|---|
| Sale price | £460,000 |
| Less probate value | (£400,000) |
| Less selling costs | (£8,000) |
| Gain | £52,000 |
| Less trust annual exempt amount | (£1,500) |
| Taxable gain | £50,500 |
| CGT at 24% | £12,120 |
The trustees must file a UK property return and pay £12,120 within 60 days of completion, and include the gain on the trust’s Self Assessment return. If the grandchildren had been given the flat outright by the trustees before the sale, each could have used their own £3,000 allowance and possibly the 18% rate, so it is worth comparing the options. Our guide to CGT on inherited property with multiple beneficiaries shows how shares are taxed.
What Happens When the Trust Ends
When a beneficiary becomes absolutely entitled to a property left in trust, the trustees are treated as selling it at market value on that date. Any gain since the probate value is taxable at 24%, unless a relief applies:
- Death of a life tenant. If the trust ends because the person with the life interest dies, there is no CGT and the property takes a new base cost at market value. The property is usually counted in the life tenant’s estate for Inheritance Tax instead.
- Holdover relief. When property leaves a discretionary trust, the gain can often be held over, so the beneficiary takes on the trustees’ base cost and pays the tax only when they sell.
- Appointments within two years of death. For Inheritance Tax, an appointment out of a discretionary will trust within two years can be treated as made by the will itself.
The beneficiary’s own base cost is the market value at the date the trust ended, unless holdover relief was claimed. For the next steps after receiving the property, see when you pay CGT after inheriting a property.
Trustee Duties: Registration and Reporting
Most trusts holding property must be registered on HMRC’s Trust Registration Service. Trustees must report and pay CGT on UK residential property within 60 days of completion, and complete a trust Self Assessment return (SA900) for each tax year in which there is a taxable gain. You can report and pay Capital Gains Tax on GOV.UK.
Not sure who to ask? Our guide to choosing a capital gains tax specialist explains what to look for and how we help clients online across the UK.
Frequently Asked Questions
Do trusts pay capital gains tax on property?
Yes. Trustees pay CGT at 24% when they sell or transfer a property for more than its base cost, after the trust’s £1,500 annual exempt amount. A bare trust is the exception, because the beneficiary is taxed instead.
What is the CGT allowance for trusts in 2026/27?
It is £1,500, half the individual allowance. It is shared if the same settlor created more than one trust, down to £300 per trust. Trusts for disabled beneficiaries get the full £3,000.
Is a house left in trust exempt from capital gains tax?
It can be. If a beneficiary entitled to live there under the trust used it as their main home, the trustees can usually claim Private Residence Relief when they sell.
What happens to a property in trust when the life tenant dies?
There is no CGT on the life tenant’s death. The property takes a new base cost at market value, and it normally counts towards the life tenant’s estate for Inheritance Tax before passing to the next beneficiaries.
Do beneficiaries pay CGT when a trust property is transferred to them?
The trustees pay any CGT when the property is transferred, not the beneficiary. If holdover relief is claimed, the beneficiary takes over the trustees’ base cost and pays CGT when they eventually sell.
Is it better to leave a house in trust or outright?
It depends on your goals. A trust can protect a surviving partner or vulnerable beneficiaries, but trustees pay CGT at a flat 24% with a smaller allowance. Outright gifts give beneficiaries their own allowances and rates.
Conclusion
A property left in trust enters the trust at its probate value with no CGT, but the trustees pay 24% on later gains after a £1,500 allowance. Private Residence Relief, the life tenant death uplift and holdover relief can all reduce the bill if the trust is set up and run correctly.
Before trustees sell or appoint a property out, compare the tax of selling inside the trust with transferring it to beneficiaries first, and keep the 60-day deadline in mind.
For advice on a property left in trust, speak to our inheritance and CGT specialists. Call us on +44 (0)1204 859315 or send us your question for a free initial consultation and a fixed-fee quote within 24 hours.
