Updated: February 2026 · Based on UK Law
What Is a Bare Trust in the UK?
A bare trust holds assets for a named beneficiary who has an absolute right to both capital and income once they reach 18 (or 16 in Scotland). The trustee holds legal title but has no discretion over how the assets are used — the beneficiary’s entitlement is immediate and unconditional from the moment the trust is created.
This guide covers trustee duties, beneficiary rights, tax rules, HMRC registration and irrevocable trust risks. Free bare trust checklist included.
A grandmother transferred £180,000 in investments into a bare trust for her grandson. The trust was never registered with HMRC. When the grandson turned 18 and tried to access the assets, the family discovered the trust had triggered a £5,000 penalty — and the grandmother’s estate still showed the assets as hers for inheritance tax purposes because the paperwork was incomplete.
Bare trusts are one of the simplest trust structures available, but that simplicity is deceptive. The tax treatment, registration obligations and irrevocable nature of a bare trust mean getting the deed right from the start is essential.
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How Does a Bare Trust Work?
A bare trust involves three key parties, each with a distinct role.
The settlor is the person who creates the trust and transfers assets into it. This is typically a parent, grandparent, or other family member looking to pass wealth to a younger generation.
The trustee holds legal title to the assets and manages them on the beneficiary’s behalf. The settlor can also act as trustee. Having at least two trustees is advisable for continuity.
The beneficiary has an absolute right to the trust assets. Once they reach 18 (or 16 in Scotland), they can demand immediate transfer of everything in the trust.
What makes a bare trust different from other trusts?
The trustee’s role in a bare trust is largely administrative. They hold legal title but have very limited discretion — they must act according to the trust deed and, once the beneficiary comes of age, according to the beneficiary’s instructions.
Unlike discretionary trusts where trustees decide how and when to distribute, a bare trust gives the beneficiary immediate entitlement from day one. They simply cannot access it until they reach the age of majority.
When Should You Use a Bare Trust?
Bare trusts are commonly used where their simplicity and tax treatment provide clear advantages.
What are the most common situations?
- Transferring assets to minors: In the UK, minors cannot legally own land or hold shares directly. A bare trust allows you to transfer property or investments to a child, with the trustee holding legal title until the child turns 18.
- Grandparent gifts: Grandparents often use bare trusts to pass wealth to grandchildren. Because the assets are treated as belonging to the beneficiary for tax purposes, income may be taxed at the child’s rate — often nil if below the personal allowance.
- Inheritance tax planning: Assets placed in a bare trust are treated as a potentially exempt transfer (PET). If the settlor survives seven years after creating the trust, the assets fall outside their estate entirely.
- Holding investments for children: Bare trusts can hold cash, shares, bonds, or other investments. Unlike Junior ISAs, withdrawals are permitted before the beneficiary reaches 18 if they are for the beneficiary’s benefit and made with trustee instruction.
- Property ownership for young adults: If you want to buy property for a child but they cannot legally own it, a bare trust allows you to hold the property until they come of age.
Bare Trust vs Discretionary Trust: Key Differences
The core difference between a bare trust and a discretionary trust comes down to control and flexibility.
How do beneficiary rights differ?
In a bare trust, the beneficiary has an absolute right to the assets from day one — they just cannot access them until they reach 18.
In a discretionary trust, beneficiaries have no automatic entitlement. Trustees decide if, when, and how much each beneficiary receives.
Can you change the beneficiary once the trust is created?
A bare trust is irrevocable — once you name a beneficiary, you cannot change it.
A discretionary trust allows trustees to add or remove beneficiaries throughout the trust’s lifetime, giving far more flexibility if circumstances change.
How does the tax treatment compare?
Bare trust income and gains are taxed as if the beneficiary owns the assets directly. The beneficiary uses their own personal allowance and tax rates.
Discretionary trusts are taxed at the trust rate — 45% for income and 20% for capital gains above the annual exemption — which is typically higher than the beneficiary’s personal rate.
Which trust is right for your situation?
If you want the beneficiary to definitely receive the assets at 18 and benefit from their personal tax rates, a bare trust is appropriate.
If you want trustees to have ongoing control over distributions — or you are concerned the beneficiary may not handle a large sum responsibly at 18 — a discretionary trust may be more suitable.
What Must a Bare Trust Deed Contain?
While a bare trust can technically be created by a simple declaration, having a proper trust deed provides clarity and legal protection for all parties.
What are the essential elements?
- Identity of the settlor: full name and address of the person creating the trust and transferring assets into it
- Identity of the trustee(s): full names and addresses of all trustees who will hold and manage the assets, including provisions for appointing replacements
- Identity of the beneficiary: full name, date of birth, and address of the beneficiary who has the absolute right to the trust assets
- Description of trust assets: a clear description of assets being placed into the trust — property addresses, share certificates, account numbers — specific enough to identify each asset
- Declaration of trust: a clear statement that the trustee holds the assets on trust for the beneficiary absolutely
- Trustee powers: powers to manage the assets, including investment powers, power to sell, and administrative provisions
- Trustee duties: confirmation that trustees must act in the best interests of the beneficiary and follow the terms of the trust deed
- Appointment and removal of trustees: provisions for how new trustees can be appointed and existing trustees removed or replaced
- Trust period: while bare trusts typically last until the beneficiary reaches 18, the deed may specify a maximum trust period of up to 125 years under the Perpetuities and Accumulations Act 2009
Our Bare Trust Deed Template includes all of these elements with clear guidance throughout each section.
Legal Requirements for a Valid Bare Trust
For a bare trust to be legally valid in England and Wales, several requirements must be met.
What are the three certainties?
Certainty of intention: there must be a clear intention to create a trust. Using words like “I declare that I hold [asset] on trust for [beneficiary]” demonstrates this intention.
Certainty of subject matter: the assets being placed into the trust must be clearly identified. Vague descriptions like “some of my shares” are not sufficient.
Certainty of objects: the beneficiary must be clearly identifiable. With a bare trust, there is typically only one beneficiary or a fixed group with defined shares.
Does the trust have to be in writing?
Under Section 53(1)(b) of the Law of Property Act 1925, any trust of land must be evidenced in writing and signed by the person creating it.
For other assets like cash or shares, a trust can technically be created orally — but written documentation is strongly advisable to avoid evidential problems later.
What other requirements apply?
Capacity: the settlor must be 18 or over and have mental capacity to understand what they are doing.
No duress or undue influence: the trust must be created voluntarily, without pressure from others.
Tax Implications of Bare Trusts
One of the main advantages of bare trusts is their tax treatment. Because the beneficiary has an absolute right to the assets, HMRC treats the assets as belonging to the beneficiary for tax purposes.
How is income taxed?
Any income generated by the trust assets — interest, dividends, or rental income — is taxed as the beneficiary’s income using their personal allowance and tax rates.
If the beneficiary is a child with no other income, they may pay no income tax at all on trust income that falls within their personal allowance.
Important exception — the parental settlement rule: Under Section 629 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), if the settlor is a parent and the trust generates more than £100 per year in gross income, all of that income is taxed as the parent’s income — not the child’s. This is an anti-avoidance rule and applies per parent, per child. It does not apply to gifts from grandparents, aunts, uncles, or other relatives.
What about capital gains?
Any capital gains on trust assets are treated as the beneficiary’s gains. The beneficiary can use their own annual exempt amount to reduce or eliminate CGT liability.
Because a bare trust is not a settlement for CGT purposes, the child’s gains are assessed independently — the parental settlement rule does not apply to capital gains.
How does inheritance tax work?
Transferring assets into a bare trust is a potentially exempt transfer (PET) for inheritance tax purposes.
If the settlor survives for seven years after the transfer, the assets are completely outside their estate.
If the settlor dies within seven years, the value of the transfer may be added back to their estate for IHT purposes. Taper relief applies if death occurs between three and seven years after the transfer.
HMRC Trust Registration Requirements
Under the 4th and 5th Money Laundering Directives, most bare trusts must be registered with HMRC’s Trust Registration Service (TRS) — even where no tax is currently payable.
What are the registration deadlines and requirements?
- Deadline: registration must be completed within 90 days of the trust being created
- Information required: details of the trust (name, date created, type), the settlor, all trustees, and the beneficiary, plus details of the trust assets
- Unique Taxpayer Reference: once registered, the trust receives a UTR which must be used for any tax reporting
- Annual updates: you must update the TRS within 90 days if any registered information changes — new trustee, change of address, or changes to trust assets
- Penalties: HMRC can charge penalties of up to £5,000 for failure to register or update the TRS on time
Even if the trust has no tax to pay — because income is below the beneficiary’s personal allowance — registration is still required for express bare trusts.
Are there any exemptions from registration?
Certain bare trusts are exempt from TRS registration. These include trusts created under legislation rather than by express declaration, co-ownership trusts where the legal and beneficial owners are the same, and bank accounts held by a parent for a minor child.
However, most deliberately created bare trusts — including grandparent investment trusts and property trusts for minors — must be registered.
Note: The government consulted on changes to TRS registration rules in 2025, with expanded scope for non-UK trusts holding UK land expected to take effect in 2026. Trustees should review their registration obligations regularly.
What Happens When the Beneficiary Turns 18?
Once the beneficiary reaches 18 in England and Wales (16 in Scotland), they have an immediate and absolute right to all trust assets.
What does the beneficiary actually receive?
The beneficiary can demand that all assets be transferred to them immediately. The trustees have no power to refuse or impose conditions.
If the beneficiary does not demand the assets straight away, the trustees can continue to hold and manage them — but they must now act on the beneficiary’s instructions.
What if the beneficiary is not ready to manage the assets?
This automatic transfer at 18 is one of the key considerations when choosing a bare trust.
If you are concerned that the beneficiary may not be mature enough to handle significant assets at 18, a discretionary trust — which gives trustees control over when and how much to distribute — may be more appropriate.
Common Mistakes When Setting Up a Bare Trust
These are the errors that most commonly cause problems with bare trusts in practice.
- Not putting it in writing: while bare trusts for non-land assets can technically be created orally, this creates evidential problems. Always use a written trust deed.
- Vague asset descriptions: describing assets as “my savings” or “some shares” is insufficient. Be specific — include account numbers, property addresses, and share certificate details.
- Forgetting to register with HMRC: all express bare trusts must be registered with HMRC’s Trust Registration Service within 90 days. Missing this deadline can result in penalties of up to £5,000.
- Parent as settlor for income-producing assets: if a parent creates a bare trust for their child and it generates more than £100 per year in gross income, all of that income is taxed as the parent’s under ITTOIA 2005, s.629. Grandparents and other relatives do not have this problem.
- Not considering the age 18 rule: the beneficiary will have absolute access to all assets at 18. If you are transferring substantial wealth, consider whether the beneficiary will be mature enough to handle it responsibly at that age.
- Creating a trust when insolvent: transferring assets into a trust while insolvent or facing bankruptcy can be challenged as an attempt to defraud creditors. The transfer can be unwound by the court.
- Assuming a bare trust guarantees asset protection: a bare trust is an ownership structure, not a shield against all claims. Trust assets may still be considered in family court proceedings or insolvency challenges.
- Assuming you can change your mind: bare trusts are irrevocable. Once you transfer assets and name a beneficiary, you cannot change the beneficiary or take the assets back.
Frequently Asked Questions
Is a bare trust deed legally binding?
Yes. When completed and signed correctly, a bare trust deed creates a legally recognised trust under England and Wales law.
For trusts involving land, the deed must be in writing under Section 53(1)(b) of the Law of Property Act 1925.
High-value or complex situations? Some customers opt for solicitor review before signing.
Do I need a solicitor to set up a bare trust?
Many complete straightforward bare trusts without one. Our template is structured following UK trust law and includes clear guidance throughout.
Consider solicitor review if the assets are high value, the circumstances are complex, or you want extra peace of mind. Your choice based on your situation.
Can a bare trust have more than one beneficiary?
Yes. A bare trust can name multiple beneficiaries with defined shares — for example, 50% each to two grandchildren. Each beneficiary has an absolute right to their share once they reach 18.
What happens if the settlor dies within seven years?
If the settlor dies within seven years of creating the trust, the value of the transfer may be added back to their estate for inheritance tax purposes. Taper relief reduces the IHT charge if death occurs between three and seven years after the transfer.
Can a bare trust be revoked or changed?
No. A bare trust is irrevocable once created. You cannot change the beneficiary, take back the assets, or alter the terms. This is a fundamental feature of a bare trust and one reason why getting the trust deed right from the outset is essential.
What assets can be held in a bare trust?
A bare trust can hold virtually any asset — cash, shares, bonds, investment funds, or property. The trust deed should clearly describe each asset being transferred.
Does the parental settlement rule apply to capital gains?
No. The parental settlement rule under ITTOIA 2005, s.629 applies only to income.
Capital gains in a bare trust are always assessed on the beneficiary, regardless of whether the settlor is a parent. The beneficiary can use their own annual exempt amount.
What is the maximum duration of a bare trust?
Under the Perpetuities and Accumulations Act 2009, a trust can specify a maximum period of up to 125 years. In practice, most bare trusts end when the beneficiary reaches 18 and demands the assets.
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Last updated: February 2026
Disclaimer: This guide provides general UK legal information, not legal advice. Laws are current as of February 2026.
