What is a bare trust for tax purposes?
Answered 17 March 2026
Here is a comprehensive answer on what a bare trust is for UK tax purposes.
What is a Bare Trust for Tax Purposes?
What the law says
For Income Tax purposes, "settled property" is defined as property held in trust, unless that person holds it as a nominee for another, or as a bare trustee for another. This means bare trusts fall outside the definition of settled property for Income Tax purposes.
For SDLT purposes, a trustee is a trustee of a bare trust if the beneficiary or beneficiaries are absolutely entitled to the property against the trustees — including cases where the beneficiary would be absolutely entitled but for disability or age preventing them from holding the legal title (Para 3, Sch 16, FA 2003).
HMRC Guidance / Practice
Core definition: A bare trust (sometimes also called an "absolute" trust or "simple" trust) is one where the beneficiary or beneficiaries have immediate and absolute entitlement to trust capital and income. The beneficiaries of a bare or simple trust have the right to take actual possession of trust property, and bare trustees hold the capital and income for the absolute benefit of the beneficiaries.
Key characteristics:
- Assets are held in the name of the trustee, but the beneficiary has the right to all of the capital and income of the trust at any time if they are 18 or over (or 16 or over in Scotland).
- The trustees of a bare trust have no control over the property held in trust except with the consent of the beneficiary.
- Trustees of a bare trust are often referred to as "nominees", especially where the assets held are shares in a limited company.
Tax treatment — the "look-through" principle: Because the beneficiary has an absolute right to trust capital and income as it arises, bare trusts are effectively transparent for tax purposes:
- The beneficiary's entitlement for tax purposes is the gross income of the trust before expenses incurred by the trustees.
- The beneficiary reports the gross trust income on their personal tax return and cannot deduct expenses paid by the bare trustees.
- Bare trusts are treated for tax purposes as if the beneficiary holds the trust property in his or her own name.
- In a nominee/bare trust arrangement, the bare trustee is the legal owner and the beneficiary is the beneficial owner — HMRC looks to the beneficiary (not the trustee) as the relevant party for tax purposes.
Registration: Bare trusts are not usually required to register for taxable purposes, because any UK tax liability is incurred by the beneficiaries rather than the trustees. However, where a new lease is granted to a person as a bare trustee, they are treated as the purchaser for SDLT purposes (Schedule 16, para 3(3), Finance Act 2003), and in that case the trust would be registrable on the Trust Registration Service (TRS).
Citation sources
Minors can benefit under the Will of a person who has died. When this happens you will get a report or a form 921 from another District telling you a minor is a beneficiary. You need to decide whether the income is paid to the minor as absolute beneficiary under a simple or bare trust. The trustees of a simple or bare trust have no control over the property held in trust except with the consent of the beneficiary. See TSEM1030 for a more detailed definition under any other trust. To help you dec
TSEM1030, TSEM3320, TSEM6272, TSEM6360 TSEM8520 The beneficiaries of a bare or simple trust have the right to take actual possession of trust property. Bare trustees hold the capital and income for the absolute benefit of the beneficiaries.
Purchases by trustees are treated differently depending whether the trustee is the trustee of a bare trust, a trust with life or income interests or any other trust. A trustee is a trustee of a bare trust if the beneficiary or beneficiaries are absolutely entitled to the property against the trustees. It also includes cases where the beneficiary would be absolutely entitled but for disability or age preventing the beneficiary from holding the legal title [Para 3 Sch 16 FA 2003]. A trustee is a t
Assets in a bare trust are held in the name of a trustee. However, the beneficiary has the right to all of the capital and income of the trust at any time if they’re 18 or over (or 16 or over in Scotland). This means the assets donated by the settlor will always go directly to the intended beneficiary. See TSEM1563 for further information on bare trusts. Trustees of a bare trust are often referred to as ‘nominees’, especially if the assets held by the nominee are shares in a limited company. The
Where a bare trust exists, the beneficiary has an absolute right to trust capital and income as it arises. So the beneficiary's entitlement for tax purposes is the gross income of the trust before expenses the trustees incur. The beneficiary shows the gross trust income on his or her personal return. He or she must not deduct the expenses that the bare trustees pay, because the income used to pay those expenses is income that belongs to the beneficiary. The general position is therefore that bar
he bare trust. A bare trust (sometimes called an ‘absolute’ trust) is where the beneficiary or beneficiaries has/have immediate and absolute entitlement to trust capital and income. Where there is no individual who is the beneficial owner of the rights or any share in the rights under the qualifying policy (i.e. where there is no absolute unfettered or unrestricted right to the policy held in trust) the beneficiary for the purposes of this legislation is the individual who created the trust, kno
Shares held by a person as a nominee are treated as being held by the nominator, and may not be used by the nominee to prove control of a company. A bare trust or nominee works as follows: The bare trust or nominee holds the shares on behalf of the beneficiary and must act in accordance with the instructions of the beneficiary. The bare trustee or nominee is the legal owner and the nominator is the beneficial owner. For example: A holds 100 shares in B on a bare trust (or as nominee) for C. Whil
ITA/S466 provides a definition of settled property for Income Tax purposes which mirrors the CGT definition in TCGA92/S68 (see CG33220+ for the corresponding CGT application). For Income Tax purposes settled property is any property held in trust by a person unless that person holds it: as nominee for another, or as bare trustee for another. Top of page
In order for the exemption to apply, section 100A provides that the company: must be wholly owned by the director or other officer of the company or by that person and other individuals with no interest in the company being partnership property and must have been the holding company of the property at all times after the relevant time The requirement that the company must be wholly owned by individuals means that the exemption will not apply where the holding company of the property is owned via