For income tax and capital gains tax a will trust takes over from the estate when the administration ends, which HMRC normally treats as the date residue is ascertained and not earlier than inheritance tax clearance. From then the same people usually hold the assets as trustees, and the reporting moves from the estate’s informal letter or estate return to a separately registered trust with its own return. For inheritance tax the will trust is treated as starting on the date of death.

Why does the changeover date make a difference?

Personal representatives and trustees are taxed differently even when they are the same people. During administration the estate pays income tax at 20%, or 10.75% on dividends received from 6 April 2026, and gets the full capital gains tax annual exempt amount of £3,000 for the tax year of death and the next two years. Trustees of a discretionary trust pay 45%, or 39.35% on dividend type income, and trustees generally get an annual exempt amount of £1,500. The reporting route, the forms given to beneficiaries and the registration duties all change too. Our page on executor and trustee tax duties sets the two roles side by side; this page is about finding the point where one ends and the other begins.

When does HMRC say the administration has ended?

HMRC’s Trusts, Settlements and Estates Manual at TSEM7360 says the administration period starts the day after death and ends when the personal representatives have taken all the steps needed to complete the administration. It is a question of fact. The Capital Gains Manual at CG30700 applies CIR v Sir Aubrey Smith: the question is whether the administration has reached a point of ripeness at which an assent can be inferred and residue has been ascertained. HMRC would normally argue that the period ends when residue is ascertained.

To ascertain residue the personal representatives must identify and quantify all the assets and liabilities, including the income tax and capital gains tax to the date of death and during administration. CG30800 adds that HMRC would not normally accept residue as ascertained before the inheritance tax clearance is issued. CG30710 accepts that administration can run on where the distribution is being challenged in litigation, or in limited cases where shares must be sold rather than split.

Formal paperwork is not decisive. CG30940 says beneficial ownership passes to the legatees once residue is ascertained, even if legal title stays with the personal representatives because a written assent has not yet been prepared. CG30720 warns that personal representatives who keep tidying up after that date are acting as bare trustees for the legatees, not as personal representatives.

Does the trust start at the same time for every tax?

Tax When the will trust counts as starting
Inheritance tax Date of death. Section 83 of the Inheritance Tax Act 1984 treats property settled by will as entering the settlement on the death, so ten year anniversaries run from that date (IHTM42221). Section 91 treats a person with a life interest in residue as entitled from the date the residue income would have been theirs.
Capital gains tax When the assets vest in the trustees, normally on ascertainment of residue. The trustees take as legatees under section 64(2) of the Taxation of Chargeable Gains Act 1992 and acquire at the personal representatives’ base cost (CG31100).
Income tax When the administration ends. Until then the income is the personal representatives’ and beneficiaries of residue are taxed under the estate rules.

The capital gains tax rule is generous. Section 62(4) and CG30770 confirm that no chargeable gain accrues to the personal representatives when an asset passes to a legatee, and CG31100 confirms that trustees of a will trust are legatees in the same way as an individual. Gains on sales after vesting belong to the trustees. When the trust later ends and assets pass to the remainderman, that person takes as a beneficiary of the trust, not as a legatee, so the trustees have a deemed disposal under section 71(1).

One exception is worth knowing. If the will sets out a life interest trust but the life tenant dies during the administration, CG31100 says no trust over specific assets ever comes into existence: the remainderman takes directly as legatee, with no gain and a base cost equal to the value at the date of death.

During administration a life tenant of residue is taxed on the grossed up amount of payments made to them in each year, with any balance treated as received when the administration is completed (TSEM7654). Our page on income and gains in administration explains the estate side in detail.

What changes in reporting when the trust begins?

Closing the estate. If the estate qualified for informal arrangements, the personal representatives write to HMRC at the end of the administration period with a year by year breakdown of income and gains. A complex estate files its final trust and estate return. Anyone who received estate income should get a completed R185 (Estate Income).

Registering the trust. HMRC’s Trust Registration Service Manual at TRSM23020 says an express trust created by will that holds only property from the estate is excluded from registration for two years from the death. TRSM23021 explains that if the trust is still in existence two years after death, it must be registered as a will trust. Where the trust only begins when assets pass to the trustees, it need not register until assets have been transferred and the two years have run. GOV.UK separately requires a trust that becomes liable to tax to register within 90 days of becoming liable, if it was created on or after 6 April 2021. See our page on the Trust Registration Service.

A new tax reference. TRSM27030 is explicit that registering a complex estate and registering a will trust are separate, and the estate’s unique taxpayer reference must not be used when registering the will trust.

Annual trust reporting. From then on the trustees file a trust and estate return each year, by 31 October on paper or 31 January online, give beneficiaries R185 (Trust Income) statements on request, and use form IHT100 for ten year and exit charges. Our guide to the SA900 trust return covers the return itself.

How does the wording of the will affect the timing?

TRSM23021 gives examples. A will that gives the estate “to my executors on trust” to pay debts and hold the balance for named people creates an express trust that starts at death and covers the administration period. A pecuniary legacy left on trust also starts at death. A will that simply appoints executors to pay debts and then hold the balance on trust creates a trust that technically starts when the administration ends and the executor becomes a trustee. Where several trusts arise under one will, each can have a different start date.

How might the timeline look?

Illustration only. Mark dies on 10 May 2026 leaving his residuary estate on discretionary trusts for his children, with his two executors also named as trustees.

  • 2026 to 2027: the executors receive dividends and rent. They pay income tax at the estate rates of 10.75% and 20%.
  • June 2027: the inheritance tax clearance arrives and the executors finalise the accounts. Residue is ascertained and the investments vest in them as trustees at Mark’s date of death values.
  • From June 2027: income is trust income taxed at 45% and 39.35%, and the trust is now liable to tax, so it must be registered with its own reference within 90 days.
  • 2027 to 2028: the estate’s income up to June goes in the final estate reporting and the trust’s income after that goes on the trust’s first return.
  • 10 May 2036: first ten year anniversary, measured from Mark’s death, not from June 2027.

What mistakes come up most often?

  • Treating the administration as continuing for years after residue is clearly known, to keep the lower estate rates.
  • Using the estate’s reference for the trust or failing to register the trust on time.
  • Counting ten year anniversaries from the date the assets reached the trustees instead of the date of death.
  • Not recording the date residue was ascertained, so nobody can show which capacity the trustees were acting in when they sold assets.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.