IHTM25554 - AR/BR 100% relief allowance: settlements - special trusts (other than age 18-to-25 trusts)

The 100% trust relief allowance can apply to charges on or after 6 April 2026 in relation to property comprised in the following types of settlement 

  • Temporary charitable trusts 

  • Accumulation and maintenance trusts 

  • Trusts for bereaved minors 

  • Employee and Newspaper trusts 

  • Pre-78 protective trusts 

  • Pre-81 Trust for disabled persons 

  • Maintenance funds. 

For guidance on these types of settlement see from IHTM42801. 

The charges are not common but, when they occur, the trustees of each of the types of trust above will have, from 6 April 2026, a 100% trust relief allowance of £2.5 million to apply when the value charged is attributable to qualifying agricultural and business property. 

This allowance is applied in the following way; 

  • it is reduced by each charge in turn until it has been used in full, i.e. it does not refresh and 

  • when there is more than one charge on the same day and the sum of the potentially relievable values exceeds the current balance of the 100% allowance, the balance is apportioned rateably. 

Example 1 

In 2028 the trustees of a special trust incurred a charge and used £1m of the 100% trust relief allowance. So, they have a remaining balance of £1.5m. 

In 2030 there were two charges on the same day with 100% relievable values of (a) £1m and (b) £2m, i.e. 1/3 and 2/3 of the total value transferred.  

Under the apportionment 

  • transfer (a) gets 1/3 of the balance of the 100% allowance (=£500k) and tax is charged on a value of £250k {(£1m-£500k) * 50%} 

  • transfer (b) gets 2/3 of the balance (=£1m) and tax is charged on a value of £500k {(£2m-£1m) * 50%}.  

And for future charges relief can only be claimed at 50% because the whole of the £2.5m allowance has been applied. 

Special trusts in existence prior to 6 April 2026  

If the value charged is attributable to property  

  • that was comprised in the settlement prior to 6 April 2026 and  

  • would have qualified for 100% relief at the date of the charge on the basis that the reforms to the reliefs had not been made 

then there are transitional provisions (FA26/Sch12/Para 17 (9)-(13)) that reduce the rate of tax on that property under IHTA84/S70(6). 

In such cases, the relievable property is treated as excluded property until the first new quarter year following 6 April 2026. That means the earlier quarter years are not counted when calculating the rate of tax on that property. 

Example 2 

A trust for the benefit of employees commenced on 1 September 2022 when the trustees were gifted 100 unquoted shares in a closely held manufacturing company.  

From 6 April 2026 the trustees’ 100% trust allowance is £2.5m. 

In 2029 the trustees distribute 50 shares to qualifying employees. There is no charge on this event, and the allowance remains intact. 

But on 10 November 2033, just over 11 years from the start of the trust, a charge under S72/IHTA/84 arises when the remaining shares are appointed to an employee who is a participator in the company. Those shares had a market value of £5m. 

The amount on which tax is charged is (£5m - £2.5m) * 50% = £1.25m. 

Without the transitional provision the rate of tax under S70(6) is 

40 quarter years @ 0.25% = 10%  

plus 4 quarter years @ 0.20%= 0.8%= 10.8%. 

And the tax would be £1.25m * 10.8% = £135,000. This is still the rate for non-relievable property (and property not qualifying for 100% relief). 

However, under the transitional provision and for the value attributable to the 100% relievable property, the complete quarters between 1 September 2022 and 1 June 2026 (the first quarter year for this trust following 6 April 2026) are not counted. So, we disregard 15 quarter years. 

The rate of tax is therefore 

(40-15) = 25 quarter years @ 0.25% = 6.25%  

plus 4 quarter years @ 0.20%= 0.8%= 7.05%. 

And the tax chargeable is £1.25m * 7.05% = £88,125.