Guidance

HMRC Trusts and Estates Newsletter: February 2026

Updated 4 February 2026

Welcome to the February 2026 edition of the HMRC Trusts and Estates Newsletter.

We do not have a mailing list for the newsletter.

Bereavement Services — dedicated postal address

HMRC’s Bereavement Services now has a dedicated postal address.

This address should be used for all correspondence relating to bereavement matters, including:

• providing notifications of death
• informal administration period queries
• sending supporting documents

HMRC’s BX9 1AS postcode should only be used for formal tax returns for the administration period.

HMRC receives large volumes of post sent to the old address, and this causes delays. Promptly updating your records and telling colleagues will help to make sure post is handled quickly.

Inheritance Tax, VAT and debt management addresses remain the same.

Changes to Automatic Exchange of Information (AEOI)

From 1 January 2026, updates to the Organisation for Economic Co-operation and Development (OECD) Common Reporting Standard (CRS) have brought more financial institutions and financial products into scope. Due diligence and reporting requirements have also been strengthened.

All reporting financial institutions and trustee-documented trusts must now register for the AEOI service. This is a one-off requirement, not annual.

Trusts are treated as entities for AEOI and they are classified as a reporting financial institution or trustee-documented trust, when specific conditions are met. You can find more information about these conditions in the International Exchange of Information Manual (IEIM400800).

The deadline to register was either:

• 31 December 2025
• 31 January following the calendar year in which you become a reporting financial institution or trustee-documented trust

You must register, even if you have no reportable accounts.

Late registration penalties will not:

• be charged automatically
• apply if you have a reasonable excuse for any delay in registering

If you need help with registering for the AEOI service you can email enquiries.aeoi@hmrc.gov.uk.

You can read the International Exchange of Information Manual (IEIM400000) for further guidance on:

• mandatory registration
• the CRS 2.0 technical requirements
• the new penalty regime

Cryptoassets — do not miss them on Inheritance Tax returns

Cryptoassets are part of the estate for Inheritance Tax purposes. When completing form IHT400, you should confirm whether any cryptoassets are held and report them in box 76, adding details in the ‘Additional information’ section.

Read more about:

• cryptoassets for individuals (Inheritance Tax) in the Cryptoassets Manual (CRYPTO25000)
• the structure of the charge, including what is classed as property in the Inheritance Tax manual (IHTM04030)

Changes to tax rates for property, savings and dividend income

At Budget 2025, the government announced it is changing rates of tax on property, savings and dividend income to make sure income from assets is taxed fairly. This includes changes to the rates of Income Tax that apply to trusts and estates.

From tax year 2026 to 2027, where the 8.75% rate applied to dividend income this will increase to 10.75%. There is no change to the 39.35% rate.

From tax year 2027 to 2028 the existing 20% and 45% rates for non-dividend income will be:

• 22% and 47% rates for property and savings income
• continuing at 20% and 45% rates for income that is not property, savings or dividend income

The tax credit accompanying an income distribution from an accumulation or discretionary trust will remain at 45%.

Read more about Income Tax and changes to tax rates for property, savings and dividend income in the tax information and impact note.

You can also read about a summary of the wider changes to tax rates for property, savings and dividend income.

Employee Ownership Trusts relief reduction

At Budget 2025 the government announced that the relief from Capital Gains Tax available on qualifying disposals of company shares to the trustees of an Employee Ownership Trust (EOT) has been reduced from 100% to 50%. This applies to all disposals made on or after 26 November 2025.

You can read further information about the reduction in relief on disposals to Employee Ownership Trusts (EOTs) in Capital Gains Tax — Employee Ownership Trusts.

Claims for relief on disposal to the trustee of an EOT, and the reporting of any resulting chargeable gains, must be made on the disposer’s Self Assessment tax return for the tax year of disposal, with payment of tax due to HMRC by 31 January following the end of that tax year.

Where consideration for a disposal is received in instalments over a period exceeding 18 months, it may be possible to apply to HMRC to pay the tax due on the disposal in instalments. Read more about this in the Capital Gains Manual (CG14910).

Capital Gains Tax — share exchanges and company reconstructions

At Budget 2025 changes to the capital gains share exchanges and company reconstructions anti-avoidance rules were announced.

This change means that the rule is more effective in countering avoidance arrangements and makes sure that only those seeking to benefit from the arrangements are affected.

This change applies from 26 November 2025 and HMRC has published interim guidance that reflect the changes while the Finance Bill is passed by Parliament.

Read more about changes to the share exchanges and company reconstructions anti-avoidance rule (interim guidance) in the Capital Gains Manual (CG-APP19).

Capital Gains Tax — incorporation relief claims process

At Budget 2025 the government announced that from 6 April 2026, incorporation relief will need to be claimed on the Self Assessment return for the tax year in which the transfer takes place. Customers will be required to provide brief details of the transaction, such as the type of business and the amount of tax deferred.

Incorporation relief may apply when an individual (including a trustee) transfers a business to a company in exchange for shares. Any tax charge incurred on the disposal to the company of the assets of the business is deferred, wholly or in part, until the shares are later disposed of. Previously the relief applied automatically. Guidance on the relief, which will be updated in due course, can be found in HS276 (Incorporation Relief (2024) Roll-over relief on transfer of a business).

You can read Capital Gains Tax: Incorporation Relief claims for more information about the incorporation relief claims process.

Personal Tax — offshore anti-avoidance

Following the 2024-2025 Call for Evidence on Personal Tax Offshore Anti-Avoidance Legislation and subsequent engagement with respondents, the government intends to substantially simplify the legislation in this area to ensure it is fit for the modern world. 

More information on future engagement with interested parties will be provided in Personal Tax Offshore Anti-Avoidance legislation.

Technical amendments — residence-based regime and Temporary Repatriation Facility

The government has included minor corrections to existing legislation within the Finance Bill to make sure that the new residence-based regime, the Temporary Repatriation Facility and the associated reliefs operate as intended, creating a tax regime that is both fair and internationally competitive.

Inheritance Tax — residence-based regime

A number of Inheritance Tax measures were announced at Budget 2025 in respect of the residence-based regime, which came into effect from 6 April 2025.

These include anti-avoidance measures, summarised as follows:

• legislation will look-through non-UK companies or similar bodies to capture the value of UK agricultural land and buildings for Inheritance Tax purposes — this follows the existing treatment for UK residential property
• where a settlor ceases to be a long-term UK resident, there will be an Inheritance Tax charge if there is a later change in situs of their trust assets from UK to non-UK, so that the trust cannot manipulate situs rules to avoid an exit charge
• in line with other taxes, Inheritance Tax charity exemption will be restricted to gifts made directly to UK charities and community amateur sports clubs — gifts to trusts which do not meet the required charity or club definition will not be exempted as they may not have UK jurisdiction or be regulated — this change does not affect the separate Inheritance Tax regime for property held in trusts.

There will also be a cap on relevant property Inheritance Tax charges for trusts which held excluded property at 30 October 2024.

Inheritance Tax — infected blood compensation payments

At Budget 2025, the government announced that it would extend the existing relief from Inheritance Tax for compensation payments made from both the:

• Infected Blood Compensation Scheme
• Infected Blood Interim Compensation Payment Scheme

The Exchequer Secretary to the Treasury made a written ministerial statement on 18 December 2025, setting out the changes which the government will make in regulations.

Inheritance Tax — reforms to agricultural property relief and business property relief

At Autumn Budget 2024, the government announced it would reform agricultural property relief (APR) and business property relief (BPR) from 6 April 2026.

At Budget 2025, the government announced that any unused amount of the new combined allowance for the 100% rate of APR and BPR will be transferable between spouses and civil partners, including if the first death was before 6 April 2026.

If the first death was before 6 April 2026, it will be assumed the entirety of the allowance will be available for transfer to the surviving spouse or civil partner. The combined 100% rate of APR and BPR will be fixed until 5 April 2031.

The government announced on 23 December 2025 that the allowance for 100% rate of relief will be increased from £1 million to £2.5 million. This means a couple will now be able to pass on up to £5 million of agricultural or business assets tax-free between them, on top of the existing allowances such as the nil-rate band.

Inheritance Tax — unused pension funds and death benefits

At Autumn Budget 2024 the government announced that it will bring most unused pension funds and death benefits into a person’s estate for Inheritance Tax purposes from 6 April 2027.

As part of these changes, personal representatives will be liable for reporting and paying any Inheritance Tax due on unused pension funds and death benefits.

At Budget 2025 the government announced that, if personal representatives reasonably expect Inheritance Tax to be due, they will be able to direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death.

Personal representatives can then direct pension scheme administrators to pay the Inheritance Tax due to HMRC, before releasing the rest of those benefits to pension beneficiaries. If the instruction is withdrawn or the period ends, the remaining funds can be paid out.

This will not apply to:

• exempt benefits
• funds under £1,000
• continuing annuities

Personal representatives will also be discharged from a liability for payment of Inheritance Tax on pensions discovered after they have received clearance from HMRC.

Inheritance Tax — Thresholds

At Budget 2025, the government announced that Inheritance Tax nil-rate bands, which are already set at current levels until 5 April 2030, will stay fixed at these levels for a further one tax year, until 5 April 2031.

The Nil-Rate Band will remain at £325,000, residential nil-rate band (RNRB) will remain at £175,000 and the RNRB taper will continue to start at £2 million.