Can a personal tax accountant help me with trusts and estate taxes in the UK?

Business Apr 26, 2025 16 Add to Reading List

Understanding Trusts, Estate Taxes, and the Role of a Personal Tax Accountant in the UK

Navigating the complexities of trusts and estate taxes in the UK can be daunting for taxpayers and business owners. With intricate tax laws, changing regulations, and significant financial implications, many wonder, “Can a personal tax accountant help me with trusts and estate taxes in the UK?” The answer is a resounding yes. A personal tax accountant provides expert guidance to ensure compliance, optimize tax liabilities, and safeguard your wealth for future generations. In this first part, we’ll explore what trusts and estate taxes entail, their importance in the UK, and how a personal tax accountant can assist, backed by the latest statistics and real-world examples.

What Are Trusts and Estate Taxes in the UK?

A trust is a legal arrangement where a settlor transfers assets (e.g., money, property, or investments) to trustees, who manage them for the benefit of beneficiaries. According to the UK government, trusts are used for various purposes, such as protecting family wealth, funding education, or supporting vulnerable individuals. In 2025, the Trust Registration Service (TRS) reported that over 2.5 million trusts are registered with HMRC, reflecting their widespread use in estate planning.

Estate taxes primarily refer to Inheritance Tax (IHT), a tax levied on the estate of a deceased person if its value exceeds the nil-rate band. For the 2024/25 tax year, the IHT threshold is £325,000, with an additional £175,000 residence nil-rate band (RNRB) for passing a home to direct descendants, bringing the total to £500,000 per person. Couples can combine thresholds, potentially reaching £1 million. HMRC data for 2023/24 shows that IHT receipts reached £7.5 billion, a 10% increase from the previous year, driven by rising property values. The standard IHT rate is 40% on estates above the threshold, though taper relief may apply for gifts made within seven years of death.

Trusts also face taxes, including Income Tax, Capital Gains Tax (CGT), and IHT. For 2025/26, trusts have a CGT annual exempt amount of £1,500, with gains taxed at 20% (or 24% for residential property). Income distributed from discretionary trusts is taxed at 45%, with beneficiaries receiving a tax credit. These figures highlight the complexity of trust taxation, making professional advice essential.

Why Are Trusts and Estate Taxes Important?

Trusts and estate taxes play a critical role in financial planning. Trusts protect assets from unforeseen events, such as divorce or bankruptcy, and ensure they are distributed according to your wishes. For example, a discretionary trust can provide for grandchildren’s education while minimizing IHT. HMRC’s 2024/25 data indicates that 30% of estates valued over £1 million used trusts to reduce IHT liabilities, saving families an average of £120,000 per estate.

Estate taxes, particularly IHT, can significantly erode wealth if not planned properly. With UK house prices averaging £290,000 in 2024 (per the Office for National Statistics), many middle-class families now face IHT liabilities. The Institute for Fiscal Studies (IFS) estimates that 1 in 10 estates will be subject to IHT by 2025, up from 1 in 20 a decade ago, due to frozen thresholds and inflation. Proper planning, often with a tax accountant’s help, can mitigate these costs.

How Can a Personal Tax Accountant Help?

A personal tax accountant in the uk is a qualified professional specializing in tax compliance and planning. They assist with trusts and estate taxes in several ways:

Trust Setup and Tax Planning

Setting up a trust requires careful consideration of tax implications. A tax accountant advises on the best trust type—bare, interest in possession, or discretionary—based on your goals. For instance, a bare trust is ideal for passing assets to a child at 18, with no IHT if the settlor survives seven years. Accountants also calculate IHT entry charges (20% on assets above the nil-rate band) and ensure compliance with HMRC’s Trust Registration Service, mandatory for most trusts since 2021.

Real-Life Example: Sarah, a 60-year-old business owner, wanted to gift £400,000 to her grandchildren. Her accountant recommended a discretionary trust to avoid a £20,000 IHT entry charge (as the gift exceeded her £325,000 nil-rate band). By structuring the trust correctly, Sarah saved £80,000 in potential IHT, assuming she lives seven years.

Preparing Trust and Estate Tax Returns

Trusts and estates require annual tax returns, such as the SA900 for trusts and IHT100 for estates. Errors can lead to penalties, with HMRC issuing £15 million in fines for late trust returns in 2023/24. A tax accountant ensures accurate filings, calculates tax liabilities, and claims reliefs. For example, they can apply Business Property Relief (BPR) to reduce IHT on business assets by up to 100%.

Minimizing IHT and CGT Liabilities

Accountants devise strategies to reduce tax burdens. For estates, they maximize reliefs like the RNRB or charitable exemptions (IHT is reduced to 36% if 10% of the estate is donated to charity). For trusts, they leverage the £1,500 CGT exemption or holdover relief to defer gains. The ICAEW reports that professional tax advice saved UK taxpayers £2.3 billion in IHT and CGT in 2024.

Handling HMRC Enquiries

HMRC’s focus on trusts has intensified, with 12,000 trust-related enquiries in 2024, a 15% rise from 2023. A tax accountant represents clients during investigations, reducing stress and penalties. They also stay updated on legislative changes, such as the Autumn Budget 2024, which increased CGT rates for trusts from 20% to 24% on residential property.

Key Statistics for 2025

IHT Revenue: £7.5 billion collected in 2023/24, projected to reach £8 billion in 2024/25 (HMRC).
Trust Registrations: 2.5 million trusts registered with TRS as of January 2025 (HMRC).
IHT Threshold: £325,000 nil-rate band + £175,000 RNRB, unchanged since 2020 (GOV.UK).
CGT Rates for Trusts: 20% (general assets), 24% (residential property) for 2025/26 (Trustee Support Services).
Trust Tax Returns: 30% of discretionary trusts faced HMRC audits in 2024 (ICAEW).
Average IHT Saving: £120,000 per estate for high-value estates using trusts (HMRC).

Real-World Case Study: Harrison v HMRC (2023)

In Harrison v HMRC (2023 UKUT 00038 TCC), a taxpayer challenged HMRC’s assessment of IHT on a discretionary trust. The settlor had transferred £500,000 into a trust but died within seven years, triggering a £70,000 IHT charge. The taxpayer argued that the trust qualified for BPR, as the assets included a family business. The court ruled in HMRC’s favor, emphasizing the need for precise documentation. A tax accountant could have ensured proper BPR claims, potentially saving the estate £70,000. This case underscores the importance of professional advice in trust planning.

Why You Need a Tax Accountant in 2025

With IHT receipts rising and HMRC scrutiny increasing, managing trusts and estate taxes without professional help is risky. A personal tax accountant not only ensures compliance but also unlocks significant savings through strategic planning. Whether you’re a business owner protecting a family company or a parent planning for your children’s future, their expertise is invaluable.

Practical Applications of a Personal Tax Accountant for Trusts and Estate Taxes

In the first part, we explored the fundamentals of trusts, estate taxes, and the role of a personal tax accountant in the UK. Now, we dive into the practical applications of hiring a tax accountant for managing trusts and estate taxes, focusing on specific scenarios, tax-saving strategies, and compliance requirements. With UK tax laws becoming more complex in 2025, a tax accountant’s expertise is crucial for taxpayers and business owners. This section provides actionable insights, real-life examples, and the latest data to help you understand how a tax accountant can make a difference.

Setting Up and Managing Trusts

Choosing the right trust is a critical decision that impacts tax liabilities and asset protection. A personal tax accountant guides you through the process, ensuring the trust aligns with your financial goals. The main types of trusts in the UK include:

Bare Trusts: Assets are held for a beneficiary who gains full control at 18. These are taxed as if the beneficiary owns the assets, with no IHT if the settlor survives seven years.
Interest in Possession Trusts: Beneficiaries receive income from the trust (e.g., rental income). Income is taxed at 20% (savings) or 7.5% (dividends), with beneficiaries claiming refunds if they’re non-taxpayers.
Discretionary Trusts: Trustees have flexibility to distribute income or capital. Income is taxed at 45%, and distributions carry a 45% tax credit.

In 2024, the Society of Trust and Estate Practitioners (STEP) reported that 40% of new trusts were discretionary, reflecting their popularity for flexible estate planning. A tax accountant assesses your needs—e.g., protecting assets for a vulnerable beneficiary—and recommends the best structure. They also handle TRS registration, mandatory for most trusts since the 5th Money Laundering Directive (2021).

Real-Life Example: John, a 55-year-old entrepreneur, wanted to protect £600,000 for his disabled son. His accountant advised an interest in possession trust, ensuring income for his son’s care without IHT charges (as transfers to disabled trusts are exempt). The accountant saved John £240,000 in potential IHT and ensured HMRC compliance.

Estate Tax Planning and IHT Mitigation

Inheritance Tax planning is a cornerstone of estate management. A tax accountant employs strategies to minimize IHT, such as:

Gifting: You can gift £3,000 annually tax-free, plus unlimited gifts if you survive seven years. In 2023/24, HMRC recorded £1.2 billion in exempt gifts, highlighting their popularity.
Charitable Donations: Donating 10% of your estate to charity reduces IHT from 40% to 36%. The IFS estimates that 15% of estates over £2 million used this relief in 2024.
Business Property Relief (BPR): Up to 100% IHT relief on business assets. In 2023/24, BPR saved UK businesses £900 million in IHT (HMRC).

A tax accountant also ensures the estate qualifies for the residence nil-rate band (£175,000 per person), which requires precise documentation. For couples, they transfer unused nil-rate bands, potentially doubling the threshold to £1 million.

Real-Life Example: Emma, a widow, had an estate worth £800,000, including her home. Her accountant applied the £325,000 nil-rate band and £175,000 RNRB, reducing the taxable estate to £300,000. By gifting £50,000 to her children seven years prior, Emma avoided £20,000 in IHT, with her accountant handling all paperwork.

Compliance and HMRC Filings

Trusts and estates require meticulous tax filings. For trusts, the SA900 return is due by 31 January (electronic) or 31 October (paper) following the tax year. Estates may need IHT100 forms if IHT is due. In 2024, HMRC issued 10,000 penalties for incorrect trust returns, averaging £1,500 each. A tax accountant ensures timely, accurate submissions and handles complex calculations, such as tax pool charges for discretionary trusts.

For estates, accountants finalize the deceased’s tax affairs, including Income Tax and CGT up to the date of death. They also prepare estate accounts, required for probate, ensuring all assets and liabilities are documented. The ICAEW notes that 25% of estates over £500,000 required professional accounting services in 2024 due to complexity.

Recent Case Study: Cox v HMRC (2024)

In Cox v HMRC (2024), a taxpayer faced £32,000 in penalties for “careless” errors in a trust tax return, related to Business Asset Disposal Relief (BADR). The trust held shares in a family business, but the taxpayer failed to document eligibility for BADR, which reduces CGT to 10%. The court upheld HMRC’s penalties, stressing the need for expert advice. A tax accountant could have ensured proper BADR claims, saving £20,000 in CGT and avoiding penalties. This case highlights the risks of DIY tax management.

Tax-Saving Strategies for 2025

A tax accountant stays abreast of 2025 tax changes, such as the CGT rate increase to 24% for residential property (Autumn Budget 2024). They recommend strategies like:

Holdover Relief: Deferring CGT on asset transfers into trusts. In 2024, 20% of trusts used holdover relief, saving £300 million (HMRC).
Tax Pool Management: For discretionary trusts, accountants manage the tax pool to avoid additional charges on distributions. In 2025, trusts with income below £500 face no Income Tax, per HMRC’s low-income trust rules.
Spousal Exemptions: Transfers to spouses are IHT-free, with 60% of estates using this exemption in 2023/24 (HMRC).

Why Professional Help Matters

The complexity of trusts and estate taxes, coupled with HMRC’s increasing scrutiny, makes a tax accountant indispensable. They provide peace of mind, save significant sums, and ensure your legacy is protected. For UK taxpayers and business owners, their expertise is a worthwhile investment.

Choosing the Right Tax Accountant and Long-Term Benefits

In the previous parts, we covered the essentials of trusts and estate taxes and the practical applications of a personal tax accountant. This final part focuses on selecting the right tax accountant, what to expect from their services, and the long-term benefits for UK taxpayers and business owners. With trusts and estate taxes growing in complexity, choosing a qualified professional is critical. We’ll also explore ongoing support, common pitfalls to avoid, and how accountants adapt to 2025 regulations, supported by examples and data.

Qualities of a Great Personal Tax Accountant

Not all tax accountants are equal. When choosing one for trusts and estate taxes, look for:

Qualifications: Membership in bodies like the Institute of Chartered Accountants in England and Wales (ICAEW) or the Society of Trust and Estate Practitioners (STEP) ensures expertise. STEP reported 22,000 members in the UK in 2025, specializing in trusts and estates.
Experience: An accountant with a track record in trust taxation and IHT planning is essential. In 2024, 70% of high-net-worth individuals hired STEP-accredited accountants for estate planning (STEP).
Communication: They should explain complex tax rules in plain English. Client reviews on platforms like TaxAccountant.co.uk show that 90% of users value clear communication.
Proactivity: A good accountant anticipates changes, such as the 2024/25 CGT rate hike, and adjusts your strategy accordingly.

Real-Life Example: Mark, a property investor, hired an accountant lacking trust experience. The accountant missed a £10,000 IHT exemption for a disabled beneficiary trust, costing Mark dearly. Switching to a STEP-accredited accountant saved him £50,000 in future IHT through proper planning.

What to Expect from Their Services

A personal tax accountant offers comprehensive services tailored to trusts and estates:

Initial Consultation: They assess your financial situation, family goals, and assets. Most offer a free consultation, with 80% of UK accountants providing this in 2024 (TaxAccountant.co.uk).
Bespoke Planning: They create a tax-efficient strategy, such as combining gifting and trusts. In 2023/24, tailored plans saved UK families £1.8 billion in IHT (HMRC).
Ongoing Support: Accountants manage annual trust returns, estate accounts, and HMRC enquiries. They also update plans as laws change, like the 2025 low-income estate rules exempting estates with income below £500.
Fee Structure: Hourly rates range from £85 (tax associate) to £342 (partner), per Bishop Fleming. Fixed fees for simple estates start at £3,500, while complex trusts may cost £10,000–£15,000.

Long-Term Benefits of Hiring a Tax Accountant

The benefits extend beyond immediate tax savings:

Wealth Preservation: Accountants ensure assets are protected for future generations. In 2024, trusts saved £2 billion in IHT for UK families (ICAEW).
Time Savings: Managing trust and estate taxes is time-consuming. Accountants handle paperwork, with 65% of clients citing time savings as a key benefit (Price Bailey).
Stress Reduction: HMRC enquiries can be daunting. Accountants represent you, reducing stress. In 2024, 12,000 trust enquiries were resolved with professional help (HMRC).
Legacy Planning: They align your estate with your wishes, such as funding education or supporting charities. The IFS notes that 20% of estates over £1 million used trusts for legacy planning in 2024.

Real-Life Example: Lisa, a business owner, faced a £200,000 IHT bill on her £1.2 million estate. Her accountant applied BPR on her business assets and set up a discretionary trust for her children, reducing IHT to £50,000. The accountant’s ongoing support ensures annual compliance, saving Lisa £15,000 yearly in administrative costs.

Common Pitfalls to Avoid

Without professional help, taxpayers risk costly mistakes:

Incorrect Trust Setup: A 2024 HMRC report found 15% of trusts were incorrectly structured, leading to £200 million in unexpected IHT.
Missed Deadlines: Late trust returns incur penalties up to £1,600. In 2023/24, 10,000 trusts faced fines (HMRC).
Ignoring Reliefs: Failing to claim BPR or RNRB can cost thousands. The IFS estimates that 25% of estates over £500,000 missed reliefs in 2024.
DIY Tax Returns: Self-filed returns had a 20% error rate in 2024, per HMRC, often due to complex trust tax rules.

Adapting to 2025 Regulations

The Autumn Budget 2024 introduced changes affecting trusts and estates, such as the CGT rate increase to 24% for residential property and stricter TRS reporting. Accountants stay updated, ensuring compliance. For example, the low-income trust rule (no Income Tax on trusts with income below £500) benefits small trusts, and accountants maximize this exemption. HMRC’s 2025 focus on employee ownership trusts (EOTs) also requires specialized knowledge, with 5,000 EOTs registered in 2024 (ICAEW).

Case Study: Robson v HMRC (2024)

In Robson v HMRC (2024), footballer Bryan Robson faced an IR35 dispute over payments to his personal services company, linked to a trust. HMRC argued the trust’s income was taxable under IR35, seeking £150,000. Robson’s accountant negotiated a settlement, reducing the liability to £80,000 by proving partial compliance. This case shows how accountants mitigate HMRC disputes, saving significant sums.

Final Thoughts on Choosing a Tax Accountant

Selecting the right tax accountant is a strategic decision for UK taxpayers and business owners. Their expertise in trusts and estate taxes ensures compliance, maximizes savings, and protects your legacy. With 2025 bringing new challenges, their role is more vital than ever.