Written by Jiten Shah, FCCA, Tax Advisor and CEO
JMS Accounting
You don’t just buy a house. You buy permanence. You buy legacy. You buy a seat at the table your grandchildren might one day inherit.
But what if the very system meant to protect property ends up slicing 40% of its value every generation? That’s the reality many UK-based and international high-net-worth individuals (HNWIs) face when it comes to residential property ownership. The taxman, unlike a courteous dinner guest, rarely leaves without his share — and quite a generous one at that.
It’s here that trusts step in — not as tax-dodging devices (those days are well behind us), but as vehicles of foresight, legacy, and intelligent planning. When used appropriately, trusts help ensure your wealth endures and serves not just your children, but your grandchildren — and perhaps even their children.
Let’s explore why placing residential property in a trust can be one of the most powerful estate-planning decisions you’ll make, especially if done with the right advice and intention.
Let’s start with a fundamental truth: buying property is easy if you have the capital. Keeping it — or more specifically, keeping it out of HMRC’s inheritance tax net — is where it gets tricky.
The UK inheritance tax (IHT) system is no secret. If your estate exceeds the £325,000 nil-rate band (and let’s be honest — most central London homes alone qualify), 40% of everything above that threshold is claimed by HMRC when you die. That includes residential property held in your personal name. For many, this results in properties being sold, mortgaged, or otherwise disassembled to satisfy that tax bill.
This isn’t merely inconvenient — it’s disruptive to families, destructive to legacies, and inefficient from a planning perspective. Enter: the trust.
Think of a trust as a family office in miniature form. It’s not a loophole, not a tax haven, and certainly not an “easy button.” It’s a legal structure in which trustees hold assets like property on behalf of beneficiaries, under the terms of a trust deed.
You, the settlor, gift the property to the trust (either during your lifetime or upon your death). Trustees manage it. Beneficiaries enjoy the benefits of it. Done well, it’s a way of saying: “This property is for my family just not owned by any one of them individually.”
And because no one person owns it, it avoids the regular 40% inheritance tax hit every time one generation dies.
But let’s not get ahead of ourselves. This isn’t tax alchemy. It’s strategy.
Let’s put it plainly: because trusts are built for permanence. They exist to guard assets, dictate how they’re used, and soften the tax blow over decades.
Instead of handing 40% of the property’s value to HMRC on your death — and again when your children die — trusts incur a maximum of 6% every ten years. That’s it. It’s not avoidance. It’s just the law — and if you’re building a legacy, that matters. This small, regular charge is far preferable to a one-off 40% event that can force a property sale.
Your beneficiaries can enjoy the use of the property, but they don’t own it. This makes it harder for ex-spouses, creditors, or bad business decisions to put family property at risk. It’s one thing to inherit a house. It’s another to lose it in a court settlement. A trust gives you a degree of firewall — not foolproof, but powerful.
When you die, assets in your name get locked up. Probate can take months — sometimes years — depending on the complexity. A trust bypasses this completely. The trustees already own the property. No freezing. No court rubber-stamping. Just continuity.
A bit dramatic? Perhaps. But we’ve all heard stories of children squandering inheritance, or family disputes over “who gets the London flat.” A trust lets you set the rules: who can live in the property, who can receive income from it, who can inherit it, and under what conditions. Control isn’t about micromanagement — it’s about stability. It’s about intention.
Trusts aren’t listed on Companies House. The Land Registry shows the trustees, not the beneficiaries. While transparency regulations have grown (rightfully so), trusts still offer a greater degree of privacy than personal or corporate ownership. For those with public profiles, or who simply prefer discretion, this can be reason enough.
Let’s talk tax — because there’s no way around it.
✅ Initial Costs:
✅ Ongoing Taxes:
✅ Professional Fees:
Running a trust properly — as you must — involves solicitor fees, tax advice, sometimes even professional trustees. But remember: this is not money spent, it’s money stewarded.
Let’s put it this way: a well-run trust costs less than a disorganised estate.
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Gone are the days when trusts operated in the shadows. Today, thanks to the Trust Registration Service (TRS) and Register of Overseas Entities, there’s a level of transparency that ensures compliance.
This is not a bad thing.
In fact, it legitimises the trust as a planning tool — not an evasion scheme. You register. You report. You stay compliant.
There’s an old saying in estate planning: “Anyone can create wealth. The wise learn how to keep it.”
A trust isn’t for everyone. But for those thinking 10, 20, 50 years ahead — for those building something worth handing down — it’s a vehicle worth serious consideration.
We use trusts not to outsmart the taxman, but to outlast him.
If you’re considering how best to hold UK residential property — and want to do so with grace, legacy, and strategy — a trust might just be your smartest move.
Written by Jiten Shah, FCCA, Tax Advisor and CEO
JMS Accounting