New statistics from the UK’s Trust Registration Service (TRS) reveal a significant surge in trust and estate registrations during 2023-24 but a decline in overall tax contributions. As of 14 August 2024, the TRS recorded 733,000 active trusts and estates, with 115,000 of these registered between 1 April 2023 and 31 March 2024—accounting for nearly one-sixth of the total.
Will Leonard, director in the private wealth and estates group at Saffery, said the sharp rise in registrations was surprising. ‘This sounds like some trustees were, and perhaps are, still waking up to the impact of the Fifth Money Laundering Directive and the requirements to register on the Trust Registration Service, as it is hard to believe that the more than 100,000 registered between April 2023 and March 2024 are all brand-new trusts,’ he said.
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Leonard noted that while HMRC has shown leniency on penalties for late registration, trustees should remain vigilant. ‘The deadline for existing non-taxable trusts to register with the TRS was September 2022, and while HMRC has been lenient with penalties so far for non-compliance, trustees should be wary of its patience running out,’ he said.
Taxable trusts make up only a small proportion of those registered, reflected in the year-on-year decline in tax contributions. For the tax year ending in 2023, total income for trusts and estates fell by 2 per cent to £3,115 million, while chargeable gains dropped by 28 per cent to £3,740 million. Combined Income Tax and Capital Gains Tax payable fell by 16 per cent, driven primarily by a 27 per cent reduction in Capital Gains Tax.
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Siena Gold, partner at Harbottle & Lewis, described the decline in income and gains as part of a long-term trend. ‘The decline in income and capital gains tax returns for trusts reflects the slow decline in the number and value of trusts over a number of decades. I think this is hugely regrettable as trusts remain an excellent vehicle for ensuring wealth and family businesses are managed and transferred between generations professionally and with sensitivity,’ she said.
Gold highlighted the critical role of trusts in addressing modern challenges. ‘This is especially important given the demographic time bomb we face with growing numbers of people suffering loss of mental capacity with age, or mental health issues when young, and the increasing complexity of managing globalised families and assets. Efficient investment strategy and stewardship support growth and, ultimately, the tax take. It would be excellent to see more support for trusts as a result,’ she added.
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Leonard also urged trustees to review their structures in light of upcoming changes to inheritance tax reliefs announced in the Budget. ‘Trustees will likely need to look closely at the suitability of their current structures in light of changes announced at the Budget—not least the reforms to Agricultural and Business Property Relief, which may affect the inheritance tax charge levied on families who have settled their business and property assets into a trust,’ he said.
