What Every Trustee Needs to Know
If you’re a trustee — or advising someone who is — it’s important to understand the periodic (10-year) charge on trusts and how it works. This is one of those tax rules that often goes under the radar until a bill suddenly lands on your desk.
Unfortunately, HMRC doesn’t accept “I didn’t know” as an excuse. If the charge is missed, or not reported correctly, trustees can face penalties, interest, and personal liability.
In this article, we’ll explain:
What the 10-year charge is
Why it exists
How it’s calculated
And why professional advice can help trustees stay compliant (and avoid nasty surprises)
What Is the 10-Year Charge?
The 10-year charge — officially known as the periodic charge — is a form of inheritance tax (IHT) that applies to certain types of trusts, usually discretionary trusts and some interest in possession trusts.
Every 10 years after the trust was first set up (the “anniversary”), the trustees may need to pay up to 6% IHT on the value of the trust’s assets.
This charge exists because trusts can be used to pass on wealth outside the standard inheritance rules — and the periodic charge is how HMRC claims a slice of that.
Why It’s So Often Missed
In our experience, the 10-year charge is one of the most frequently overlooked parts of trust taxation. Here’s why:
The first charge only kicks in 10 years after the trust was created — long enough for the detail to be forgotten
Trustees often change over time, and new trustees may not know what’s due or when
There’s a common (but incorrect) assumption that tax only arises when money is paid out of the trust
If no one’s keeping track of the trust’s timeline, it’s easy to miss the 10-year point altogether — and that’s when the problems start.
How the Charge Is Calculated
Working out the 10-year charge isn’t as simple as applying a flat rate. It depends on:
The value of the trust’s relevant property at the 10-year point (usually investments, property, or cash)
Whether any assets are excluded from IHT (e.g. business or agricultural relief)
The available nil-rate band, which may be reduced if the settlor made chargeable transfers before setting up the trust
Additions and distributions made since the trust was created
Even the effective rate of tax isn’t straightforward. While the maximum is 6%, the actual figure is based on a notional calculation assuming a lifetime transfer — and it can get messy quickly, especially with older or complex trusts.
What Trustees Need to Do
If you’re a trustee, it’s your legal responsibility to:
Keep track of key dates — especially the 10-year anniversary
Value the trust assets at that date
Calculate and pay any IHT due
Submit the IHT100 form (and IHT100a) within 6 months of the anniversary date
Miss any of these steps, and HMRC can impose penalties and interest — even if the tax due turns out to be nil.
Why Getting Advice Is Worth It
Trust taxation is full of hidden traps. Even well-intentioned trustees can fall foul of the rules, especially if:
The trust holds property or shares
The settlor made previous gifts or set up multiple trusts
You’re unsure about what counts as relevant property
You don't have a clear record of trust events over the last decade
This is where getting help from a trust tax adviser can make a real difference.
We can:
Review your trust’s history and structure
Calculate the 10-year charge accurately
Handle the IHT100 paperwork and submission
Flag any future issues early, so you’re not caught off guard again
Final Thoughts
The periodic charge might not be the most exciting part of running a trust — but it’s one of the most important. Getting it wrong can lead to real stress for trustees, and costly consequences for the people the trust is meant to benefit.
If you think your trust might be approaching a 10-year anniversary, or if you’re not sure whether the charge applies, it’s worth checking now — before HMRC does.
We’re here to help, contact us below or call 01442 828006
