Technical article

United Kingdom: The Ten-year Charge and the Exit Charge, and How Big the Bill Gets

After five years, which is 20 quarters, the top exit charge is half of 6%, or 3% of the amount leaving.

By Neil Solomon · 4 min read

Imagine a widow in London with two daughters, one in Canada and one in Portugal. She puts a large sum into a discretionary trust, a trust where the trustees decide who gets what and when. She wants it to last for the grandchildren. What does the trust pay the UK along the way?

Part of the answer is a charge that comes around every ten years. It is called the periodic charge, and it is paid by the trust, not by the daughters.

The ten-year charge

On each ten-year anniversary of the trust, the UK looks at the value of the trust property. The first GBP 325,000 is covered by the nil-rate band, the amount of inheritance tax-free allowance. That band is frozen until April 2031. The charge on the value above it is up to 6%.

The word "up to" matters. The official manual sets 6% as the top. The exact rate depends on the trust's history, and money added later is charged for a shorter time. Here is the top of the range at three example sizes. The amounts are examples, in pounds.

Those are ceilings. They also assume the whole amount is UK-taxable property and the full band is available.

The exit charge

Money can also leave the trust between anniversaries. A payment to a beneficiary, or an asset handed over, bears an exit charge. This is a fraction of the 6% rate.

The fraction depends on the number of full quarters that have passed since the trust began or since the last anniversary. Ten years is counted as 40 quarters. Nothing is charged in the first quarter. After five years, which is 20 quarters, the top exit charge is half of 6%, or 3% of the amount leaving. After nine years it is close to the full 6%.

So a trust that pays out soon after an anniversary pays little. One that pays out just before the next anniversary pays close to what the anniversary charge would have been.

When none of this applies

The ten-year and exit charges reach foreign assets only if the person who set up the trust was a long-term UK resident at the time of the charge. Long-term means UK resident for 10 of the last 20 tax years. A settlor who is not long-term resident, who puts non-UK assets into the trust, leaves those assets outside this tax. UK property and UK land stay in. The rule has applied to charges on or after 6 April 2025.

A settlor who leaves the UK may stay in the net for a tail of 3 to 10 years, depending on how long they lived there. The exact table, from a tier B source, runs from 3 years for 13 or fewer years of residence up to 10 years for 20.

You might say: "I only want the money to reach my grandchildren intact. Why does a trust that never spends anything pay this?" That is a fair way to see it. The charge is on the value held, not on spending, which is why it is the same whether the trust pays out or not. Some families set the trust up with a shorter life in mind, or fund it in stages. You could ask a UK adviser how the first ten-year date would look for your own mix of assets.

The people this touches are the settlor, who sees the entry charge first (20% above the band when money goes in during life), the trustees, who file and pay within six months of each event, and the grandchildren, whose share is what is left after each charge. A gift into the trust within seven years of the settlor's death is priced again at death, and the usual seven-year rule does not help a gift that sits in a trust.

Where have you seen a family plan around a date like the ten-year anniversary? If you have a story that might help another reader, share it here.

Figures are estimates for planning, based on public data. Date read: October 2026.