HMRC · Relevant property trusts

The Ten-Year Anniversary Charge: How the Calculation Actually Works

Most discretionary trusts owe HMRC a charge on the tenth anniversary of the day the trust began, and every ten years after that. The rate can be anything from nil up to a ceiling of 6% of the trust's value, it comes out of a defined calculation rather than a flat rate, and both the return and the tax are due six months after the end of the month the anniversary falls in. This page explains how that calculation runs, what the two deadlines are, when the smaller exit charge applies instead, and who HMRC holds responsible if it is missed. It explains the method; it does not do a particular trust's arithmetic, because the inputs that decide the number live in the trust's own deed and history.

Below: which trusts the charge actually catches and which sit outside it (§I); HMRC's own four-step method in plain terms, and the inputs that move the number (§II); the two six-month deadlines and the small-trust exemption from filing (§III); how an exit charge between anniversaries differs, before and after the first anniversary (§IV); and penalties, interest, instalments and personal liability (§V). What this page deliberately does not do is tell you what your trust owes. That depends on the settlor's gifting history, every earlier distribution, anything added, and the deed itself — which is why the computation is a job in its own right, not a lookup.

The charge is on a trust's relevant property, not on trusts in general. Under s.58 IHTA 1984, relevant property is settled property in which nobody holds a qualifying interest in possession, other than a short list of carve-outs: property held for charity, trusts for bereaved minors and 18-to-25 trusts, registered pension scheme property, employee trusts, excluded property and a few specialist funds. A qualifying interest in possession is, since 22 March 2006, essentially one of three things: an immediate post-death interest (an IPDI), a disabled person's interest, or a transitional serial interest (s.59). Everything else held on discretionary or accumulation trusts is relevant property, and the charge follows it.

The statutory wording is s.64(1): where, immediately before a ten-year anniversary, all or part of the property in a settlement is relevant property, tax is charged on the value of that property at that time, at the rate set by ss.66–67. The anniversary itself is defined in s.61(1).

When the clock started matters more than people expect. For a trust set up under a will, s.83 IHTA 1984 treats the property as having become settled on the date of death — so the first anniversary is the tenth anniversary of the death, not of the grant of probate or the date the executors finally moved the assets across. HMRC's manual adds that where a will or intestacy is varied by a deed of variation to create a trust, the start date is taken back to the date of death as well (IHTM42221). For a lifetime trust it is the date property first went in. Nothing that happens later — a change of trustees, a later addition, the trust becoming relevant property after a period when it was not — moves the anniversary dates.

Which column a particular trust sits in is a question about its deed and its history, not a checklist. The same family trust can be outside the regime for twenty years and inside it from the day a life tenant dies; a trust drafted as a life interest can fail the s.49A conditions on a single point and be relevant property from the start. Whoever holds the deed — and knows what has happened under it — is the person who can settle that question. This page assumes the trust is relevant property and explains what follows.

HMRC's manual sets the rate out as a sequence of four steps, and the statute behind them is s.66 IHTA 1984. The idea underneath is that a trust should pay something comparable to the 40% that would have fallen on a death once a generation — so a 20% lifetime rate is applied to a notional transfer, and the trust pays three-tenths of that every ten years (IHTM42085). The four cards below are HMRC's own order (IHTM42085–IHTM42088). None of them is a lookup; each depends on a fact only the trust's records can supply.

HMRC's manual carries a worked illustration at IHTM42087 (Example 1) that shows the shape without any invention on our part: a trust set up in 2010 with £300,000, by a settlor who had made £50,000 of chargeable transfers in the previous seven years, with no capital paid out in its first ten years, and worth £450,000 at the 2020 anniversary. The nil-rate band available is £275,000 (£325,000 less £50,000). Running the steps above, HMRC arrives at a rate of 2.333% and tax of £10,498.50. Change any single input — a further gift by the settlor in the seven years before 2010, a capital distribution in 2015, £50,000 added in 2018 — and the rate changes with it. That is the point: the number is a consequence of the trust's history, not of its current value alone.

Eight facts do most of the work, and every one of them has to be established rather than assumed.

1. The trust's true commencement date — for a will trust, the date of death.
2. Every chargeable transfer the settlor made in the seven years before that date, and whether any potentially exempt gifts in that window later failed.
3. Every capital distribution or other exit in the ten years before this anniversary, and what it was charged on.
4. Anything added to the trust since it began, and when.
5. Income the trustees formally accumulated, and income simply left undistributed, each with dates.
6. Whether the settlor made any other trust on the same day, or added to two trusts on the same day after 10 December 2014.
7. Whether any of the property qualifies for business or agricultural relief — deducted from the current chargeable value, but never from the historic values used to set the rate (IHTM42165), and subject to the changes in force from 6 April 2026 that the IHT explained page covers.
8. Open-market valuations of everything in the trust as at the day before the anniversary, on the basis the IHT100d notes require.

Where the records are complete, the four steps are mechanical. Where they are not — an old family trust, a settlor who has died, trustees who inherited the role — reconstructing items (2), (3) and (5) is the real work, and the part most worth paying for.

An anniversary on 12 March falls in March; March ends on 31 March; six months from then is 30 September. The IHT100d and the payment are both due by 30 September. The same arithmetic applies to an anniversary on 1 March or 31 March — the month, not the day, sets the deadline. Because the return and the money fall due together, the valuation, the computation and the funds all need to be in place by then; HMRC asks trustees to apply for a payment reference on form IHT122 at least three weeks before paying. The deadline is the same whether or not any tax turns out to be due — a nil-rate return is still a return.

Property leaving the relevant property regime between anniversaries triggers a proportionate charge — usually called an exit charge — under s.65 IHTA 1984. The commonest trigger is a capital distribution to a beneficiary, but the section also bites when property stops being relevant property without leaving the trust (an appointment of a qualifying life interest, for instance), and when the trustees do something that reduces the value of the relevant property. The amount charged is the loss to the trust — how much less the relevant property is worth after the event than it would have been without it — and if the trustees pay the tax out of the trust rather than the beneficiary bearing it, that amount is grossed up so the tax is charged on the full sum leaving (s.65(2)(b), IHTM42118). No grossing-up ever applies to the ten-year charge itself.

• —No exit charge in the first quarter. An event in the three months beginning with the day the trust commenced, or with any ten-year anniversary, is outside s.65 altogether (s.65(4)).
• —Costs and income are not exits. A payment of the trust's own costs and expenses, and any payment that is someone's income for income tax purposes, is not charged (s.65(5)).
• —A nil rate at the last anniversary means a nil exit charge until the next one — the between-anniversaries rate is a fraction of the anniversary rate, and a fraction of nil is nil (IHTM42115).

Choosing the wrong formula produces a materially wrong number, and so does miscounting the quarters. HMRC publishes a quarters calculator for exactly this purpose (GOV.UK, “Work out the number of quarters when Inheritance Tax is charged on a trust for certain chargeable events”). The account for an exit is form IHT100c — “Assets ceasing to be relevant property (proportionate charge)” — and the deadline is the same six-months-from-the-end-of-the-month rule as the anniversary charge (s.216(6)(ad), s.226(3C)). The same 80%-of-nil-rate-band exemption from filing can apply to an exit, tested on the historic notional transfer for a pre-anniversary exit and on the anniversary figures for a later one (SI 2008/606 reg 4(6)–(7)).

A late IHT100d or IHT100c is treated like any other late Inheritance Tax account. HMRC's manual lists the IHT100 series alongside the IHT400 as accounts whose late delivery “may result in a penalty under IHTA84/S245” (IHTM36022). The statute (s.245 IHTA 1984) sets the amounts: £100 for failing to deliver the account on time; a further £100 if it is still outstanding six months after the due date and HMRC has not begun proceedings; and, where the failure runs past twelve months and the account would have shown tax to pay, a further penalty of up to £3,000. The first two are capped at the tax actually due where the trustees can show their liability was lower (s.245(5)), and none of them applies where there is a reasonable excuse and the account is then delivered without unreasonable delay (s.245(7)). Separately, interest runs on unpaid tax from the six-month due date (s.233(1)(aa)) at HMRC's late-payment rate — set at Bank of England base rate plus 4 percentage points since 6 April 2025, and standing at 7.75% from 9 January 2026 (GOV.UK, HMRC interest rates, checked 3 September 2026). Interest is not deductible for any tax purpose (s.233(3)).

Facts on this page were checked against the Inheritance Tax Act 1984 on legislation.gov.uk, HMRC's Inheritance Tax Manual and GOV.UK guidance on 3 September 2026. It explains how the rules work; it is not advice on any particular trust — for a computation you can rely on, take advice from a solicitor or accountant before relying on anything stated here.

Three ways to act on this, depending on where you are.

One reader is a trustee facing an anniversary or exit charge right now and wants it computed properly. Another needs to check whether the same trust also has to be registered with HMRC's Trust Registration Service. A third isn't yet sure the trust is relevant property at all.