Taxation of trusts and estates—property income
Taxation of trusts and estates—property income

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Taxation of trusts and estates—property income
  • Territorial scope of a property business
  • Calculating income and expenses
  • Losses of a property business
  • Starting and ending a property business
  • Reporting

FORTHCOMING CHANGE: As originally announced at Autumn Budget 2017 and followed up by written statement after Spring Statement 2018, plus an announcement in Budget 2018, the government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. See also the research exploring the use of trusts which was also published on 7 November 2018. See News Analysis: Exploring the consultation and review on the taxation of trusts.

It is common for trustees or personal representatives (PRs) to run a property business. A property business is one which generates income from land (see below as to the meaning of generating income from land) and includes every transaction entered into for that purpose. For example, a trust could own rental properties as investments or there could be a rental property in the estate of a deceased person.

The profits of a property business are charged to income tax by section 268 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). Receipts of a UK property business which are also receipts of a trade within ITTOIA 2005, Pt 2 (ie receipts that could fall within either the property or trading income rules) are required to be taxed