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Renters Rights Act 2025 – A guide for Landlords

Posted on January 27, 2026January 27, 2026 by Wellers

The Renters Rights Act 2025 introduces significant reforms to the residential rental market in England and was introduced to create a fairer, more secure private rental market for the benefit of both renters and responsible landlords.

Only a small number of the Acts provisions take effect immediately and the remainder of the Act will be implemented in three phases.

Here we provide an overview of the new tenancy regime to be implemented as phase one from 1 May 2026 and what this means for Landlords

Click here to read Renters Rights Act 2025 – A guide for Landlords

Employment Rights Act 2025 – a summary

Posted on January 26, 2026January 27, 2026 by Wellers

In December 2025 the Employment Rights Act became Law.

It contains sweeping changes to employment law in Great Britain.

This table below contains a summary of the provisions of the Employment Rights Act 2025 and the proposed timings for changes.

If you are a small business owner or entrepreneur and would like to talk to us about how we can help to implement these changes in your business, or if you are an individual wondering how these changes will affect your employment, please talk to us on 020 7481 2422 or email enquiries@wellerslawgroup.com

Changes from April 2026

Provision	Points to Note
Statutory sick pay (SSP) to be paid to all workers from first day of absence at a rate of either 80% of weekly earnings or the flat rate, whichever is lower	Currently, employees need to earn at least the lower earnings limit to get SSP and it’s paid from the fourth day of sickness absence. Will apply to GB and NI
Parental leave to become a day one right.	Before an employee can take parental leave under the current rules, they must currently have one year’s service with their employer.
Paternity leave to become a day one right	Paternity leave is, under current rules, available to employees who have 26 weeks’ service with their employer counted at the 15th week before the expected week of childbirth, or in the week their partner is notified of being matched for adoption.
A new Fair Work Agency will be established to bring together different government enforcement bodies. The agency will have the powers to enforce payment of statutory payments, bring employment tribunal claims on behalf of individuals, and provide legal assistance, support, or representation where individuals have raised a claim themselves.	There are currently various separate agencies that deal with enforcement, for example, HMRC, the Gangmasters and Labour Abuse Authority. Currently there are no provisions for someone to make an employment tribunal claim on behalf of someone else.
Increase the maximum protective award a tribunal can make when a business has failed to follow their obligations on collective consultation.	The maximum award will increase from 90 days’ pay to 180 days’ pay.

Changes from October 2026

Provision	Points to Note
“Bullying” fire and rehire practices will be brought to an end.	“Fire and rehire”, where an employer dismisses and re- engages an employee to push through changes to terms and conditions, will be an automatic unfair dismissal where it relates to certain “restricted variations” except where a business is in serious financial trouble affecting its continuation, and the employer could not reasonably have avoided the need to make the change.
Extended time limit for tribunal claims.	The time limit for employees to bring a claim to a tribunal will be increased from three to six months.
Employers will be required to take all reasonable steps to prevent sexual harassment in the workplace.	Under a proactive duty in place from October 2024, employers must take “reasonable steps” to prevent sexual harassment in the workplace. This obligation will be strengthened to taking “all reasonable steps”.
Employers to be liable for third party harassment	Currently, employers are not liable for third party harassment (harassment from a client, customer, member of the public etc) although under a proactive duty in place from October 2024, employers must take reasonable steps to prevent third party sexual harassment.
Trade union statement and right of access	Employers will have to provide a statement to employees to inform them of their right to join a trade union. The right to access will be restricted to workplaces that are not also dwellings, and they must be a ‘qualifying’ trade union with an independent certificate.

Changes from 2027

Provision	Points to Note
Unfair dismissal qualifying service will be reduced from two years to six months from 1 January 2027, and compensation limits for unfair dismissal claims will be removed.	Employees must currently wait for two years until they have protection from ordinary unfair dismissal. From 1 January 2027, employees who have six months service will be able to bring an unfair dismissal claim. Also, the cap on unfair dismissal awards will be lifted. This means compensation will no longer be limited to 52 weeks or £118,223.
A new right to bereavement leave of at least one week to apply from day one of employment.	Parental bereavement leave is the only legal entitlement to time off to grieve, and this only applies to parents whose child, under the age of 18, dies. Under this, the right to unpaid bereavement leave will cover a wider set of circumstances including miscarriages before the 24th week of pregnancy.
Flexible working will be made the default unless the employer can show it’s unreasonable.	Employers can currently decline flexible working requests if one or more of eight specific grounds apply. Under the new rules, they will also need to show why it was reasonable to refuse the request.
Collective redundancy procedures to be extended.	A new threshold to trigger collective consultation will be introduced for multi-site redundancies.
Employees will be given more protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work.	This group of employees were given enhanced protection against redundancy in April 2024. The new provision will strengthen the position further and prevent dismissal in other circumstances except where specific rules apply.
Zero hours workers (including agency workers) will be entitled to reasonable notice of shifts and changes to their shifts, and compensation for shifts which are cancelled, moved or ended early	This will be a brand-new addition; there are no similar rules currently in place. Future regulations will set out how much notice the employer needs to give. These rules will apply to all shifts set by the employer, either ‘required’ or ‘requested’.
Those working on zero hours or ‘low hours’ contracts (including agency workers) will have the right to be offered a guaranteed hours contract to reflect regular hours they have worked over a defined period	Employers will be required provide information upon employment, and continually throughout for workers who may later be eligible for a guaranteed hours offer. They will also be required to provide supporting information when making the offer. Workers will be able to remain on the zero-hour contract if they choose. Importantly, this law will apply to ‘low hour’ contracts too.
Large employers will be required to create action plans on supporting employees through menopause and reducing their gender pay gap.	It is likely that “large employer” will be defined as those with 250+ employees. It’s worth noting that an action plan is different to a policy.

Source CIPD

Christmas Spirit in the community

Posted on December 15, 2025December 15, 2025 by Wellers

Supporting The Rotary Club Christmas market in Bookham High Street

A wonderful Saturday spent supporting our local community at the Rotary Club Christmas event 🎄

With the high street closed, festive performances nearby and plenty of footfall, it was fantastic to welcome so many families into our office.

Over 135 children completed our Christmas quiz, and we had some great conversations with both familiar faces and new visitors throughout the afternoon

Days like this are a great reminder of the value of being present and involved in our local community 💙

Law firm of the year 2025

Posted on December 9, 2025December 9, 2025 by Wellers

We are delighted to announce that Wellers Law Group LLP was chosen by Environmental Finance judges as the winner of Law firm of the year category for the IMPACT Awards.

We were recognised for our work over the past18 months, helping to successfully establish and register Water Unite as a UK-registered charity. We also co-designed an affiliated Financial Conduct Authority-authorised fund, Water Unite Impact, which was a “rare and complex case” linking charitable objects directly to an impact investment vehicle.

Through our close partnership with investment manager Wellers Impact, the adviser to Water Unite Impact, we gained substantial sector insights allowing us to provide commercial, practical and timely legal advice.

We also structured and documented a blended finance model of risk-tolerant “catalytic capital” that has attracted institutional investment including a $7.5 million commitment from the US International Development Finance Corporation (DFC).

More information can be found in this case study “Establishing Water Unite as a Charity”

Congratulations to everyone involved.

If you would like legal advice on any matter, please contact us on 020 7481 2422 or email enquiries@wellerslawgroup.com

The Smorgasbord Budget: Light on Good News, Heavy on Future Taxes

Posted on December 9, 2025December 9, 2025 by Wellers

So, the budget finally arrived after what felt like weeks of waiting – but what did it include?

At first glance the measures were not nearly as bad as first feared, and some of the more worrying measures that were anticipated ahead of the official announcements, did not make the grade.

However, there are still many changes which will hurt workers, savers and investors and with the rise in alcohol duty, there was nothing much to be cheerful about in this Budget.

Some of the most notable measures announced in the Budget include:

Tax thresholds for Income Tax, National Insurance, Inheritance Tax and VAT are frozen, pulling more people and businesses into higher taxes over time through fiscal drag
Pension contributions above £2,000 made through salary sacrifice will attract National Insurance from 2029
Income Tax on savings, rental income and dividends will rise by 2%, adding pressure especially on landlords
A new “Mansion Tax” from 2028 will charge homeowners with properties over £2 million and £5 million an extra £2,500 and £7,500 in annual tax respectively
Electric and hybrid drivers face new per-mile charges from 2028
Relief on Employee Ownership Trust sales has been cut immediately, raising tax from 0% to 12%

Is there good news in the Budget?

As it happens, the good news, is actually what the Chancellor omitted this time:

It did not include a tax rise on companies – rates and reliefs stayed the same with a little extra for businesses that invest into certain qualifying assets

It did not include an exit tax – a relief for expats and anyone thinking of moving to sunnier climes

It did not include a tax on members of partnerships similar to employers’ National Insurance

It did not include a tax based on the value of your home when selling it – which was welcome news for homeowners who worried they would not be able to downsize if they wanted to release capital

It did not include an increase to income tax, National Insurance or VAT – or at least the rates themselves didn’t increase …

And it didn’t include an explicit wealth tax – although the lasting impact will be just that.

So what did it include?

Freezing tax thresholds

The freezing of Income Tax and National Insurance thresholds will drag more workers into higher rates of tax as wages grow.

The nil rate band for Inheritance Tax (IHT), below which an estate does not attract IHT, has been frozen. It last changed almost 20 years ago.

The VAT threshold above which a business must register was also frozen having been widely expected to drop. This may have discouraged businesses from growing their turnover above it, for fear of losing customers who seek out non VAT registered trades.

Pension and income taxes

Private sector employees will face further taxes on pension contributions that they make via salary sacrifice. Contributions that are currently exempt from National Insurance will now attract it above an annual £2,000 threshold.

The real nasty for savers and investors is income tax increases. Rates are going up by 2% on income from savings, rental properties and dividends.

For landlords, already struggling under increased regulation, it is another unwelcome burden.. It seems likely that these changes will encourage more savers and investors to consider Family Investment Companies where tax rules may be more attractive.

The “Mansion Tax”

From April 2028 those that live in a house worth more than £2 million will be liable for an additional tax burden, collected through the Council Tax, (although not given to the councils apart from a collectors fee). This starts at £2,500 and rises to £7,500 for homes worth more than £5million. It is estimated more than 140,000 homes will be affected by this by the time it comes in.

Electric vehicles

If you drive an electric or hybrid car, you will need to pay an extra 3p or 1.5p per mile from April 2028. The cost and complication of enforcing a mileage-based scheme is sure to be high.

Employee Ownership Trusts

Effective immediately, those selling their businesses to an Employee Ownership Trust now receive only half the relief they did previously, taking the tax rate from 0% to 12% while the ink is still drying on the contract.

What does it all mean?

This budget has been called a smorgasbord. It’s a haphazard collection of measures, with many not even coming into effect for years, perhaps even after the next election, in which case, you might ask, why cause all this anxiety ? It also feels very heavy on the costs of implementing some of the more complex workings out.

However, when, or possibly if, they do come into effect, the reality is that businesses, employees and investors will pay more tax.

At Wellers, we remain available to our clients and any business owners or individuals who would like our support interpreting what the Budget means for you and what actions you might take next to minimise the impacts.

Please contact us at enquiries@wellerslawgroup.com or phone 020 8464 4242

Keeping it in the Family – Are Family Investment Companies the New Trusts?

Posted on August 12, 2025November 5, 2025 by Wellers

Family Investment Companies (FICs) have been used as part of succession planning since changes to trust taxation were brought in by the Finance Act 2006. Their use is likely to rise due to the Inheritance Tax net widening as a result of the latest budget, particularly from April 2027 when pension pots will be included in estates for Inheritance Tax purposes.

What is a Family Investment Company (FIC)?

An FIC is simply a company that has been established with the specific purpose of meeting the needs of a single family. It is generally created to hold investments for the family.

The investments within the company would typically include equities and/or property.

How can a FIC be used in Estate Planning?

Estate planning is not just about saving Inheritance Tax. Although this is a key objective, it is also about maintaining and protecting family wealth.

A company is a structure that enables ownership to be separated. Ownership is with the Shareholders but the day-to-day management and control of the business is with the Directors. Using a company enables a family to pass wealth down through generations without giving up control of how the wealth is managed.

Capital is also not easily extracted, which helps ensure it is preserved for future generations. The constitution of a FIC can also help protect against the impact of divorce by encouraging the use of marital agreements and by controlling the ownership of shares.

Inheritance Tax Saving – 3 Key Benefits:-

The reduction of the estate of the founders of the FIC. They will make a gift on the formation of the company, by either passing shares or cash for the subscription of shares to children/grandchildren. Sometimes cash is also gifted to a family trust, which will then subscribe for shares. These initial gifts save Inheritance Tax completely if the donor then survives 7 years;

To the extent shares are held by family members and not the founders, the profits generated by the FIC will be outside the founders’ estate, saving further Inheritance Tax;

A FIC is not within the relevant property regime so is not subject to 10 year anniversary charges of 6% like a discretionary trust would be, or subject to exit charges.

Discretionary Trust vs FICs

	Discretionary Trust	FIC
Control	The trustees manage and control a discretionary trust and must do so for the benefit of their beneficiaries	Directors control a FIC on a day to day basis and have similar fiduciary duties to trustees, acting in the best interests of the company and its shareholders
Who Can Benefit	A key advantage of a discretionary trust is that anyone within the class of beneficiaries can benefit. A trust can also have a power to add new beneficiaries	Only shareholders can benefit from dividends and capital growth. A company can also employ anyone.
Funding	A trust can be funded up to an individual’s available nil rate band (£325,000) but may be otherwise taxed at a lifetime Inheritance Tax rate of 20%	Shares can be subscribed for in cash up to any value without tax charges. If a FIC is established, shares should be subscribed for at their market rate to avoid tax charges
Tax on Income	Trusts pay income tax at 45% or 39.5% on dividend income	FICs pay corporation tax at 25% or 0% on dividend income
Tax on Gains	Trusts pay capital gains tax at 24%. Annual exemption is £3,000	FICs have no annual exemption and pay corporation tax on capital gains at 25%
Distributions of Income	A beneficiary receives income with a tax credit at 45% which can be reclaimed if the beneficiary is a lower rate tax payer	Income is paid in the form of dividends from post-tax profits and taxed at the individual’s appropriate dividend rate. An annual exemption of £500 is available
Distributions of Capital	Capital distributed from a relevant property trust may trigger an exit charge but is not taxable on the beneficiary	Capital is not easily distributed to shareholders. Any profit element will give rise to either an income tax charge or a capital gains tax charge
Inheritance Tax	A trust will pay tax on every 10 year anniversary at a rate of 6% on the market value of all assets above the nil rate band	A FIC does not pay inheritance tax but a shareholder will pay inheritance tax on the value of shares within their estate – this value may be discounted to reflect a minority interest
Privacy	Whilst all trusts now have to be registered with HMRC, the register is not a public document	Companies have to be registered at Companies House and details of shareholders will be available. Company’s articles of association are public

Trusts have always been a traditional feature of estate planning, however as many of the tax advantages will survive the recent tax changes, FICs are becoming increasingly popular as an alternative to trusts.

In some ways trusts and FICs are similar. For example, they are both essentially set up for the management of assets for the benefit of the underlying beneficiaries and to preserve the family wealth.

Trusts still certainly have a place in estate planning, and have perhaps always been the default position when wanting to gift assets whilst also retaining an element of control. For the higher net valued individuals who wish to gift significant values and where perhaps flexibility and family involvement are priorities as well as investment growth, a FIC may be the better option. A combination of the two can also provide for an effective structure. For example, the addition of a discretionary family trust within the FIC structure could offer more protection of capital assets, particularly in the event of divorce.

Ultimately, as with any structure there are pitfalls, nuances and anti-avoidance rules to consider. Setting up a FIC is not a one size fits all exercise. It is a bespoke structure and multi-disciplinary advice should be sought to ensure it is appropriate to meet your family’s needs.

Here at Wellers we can help. Please contact us on 020 7481 2422 or email enquiries@wellerslawgroup.com

Inheritance Tax Planning Update – webinar recording

Posted on May 1, 2025August 12, 2025 by Wellers

Planning for the future is rarely straightforward, especially when inheritance tax and family dynamics come into play. That’s why Wellers and Gravita co-hosted a practical webinar exploring the key issues from both tax and legal perspectives. The panel, hosted by Gravita Accounts Partner, Mark Rubinson, consisted of Gravita Private Client Tax Partner, Michaela Lamb and Wellers Senior Private Client Solicitor, Aarti Gangaramani.

What did the session cover ?

The session explored everything from gifting your home to the upcoming changes for non-doms. A key takeaway was that while DIY wills or AI-generated templates may seem convenient, they often fall short. Mistakes in structure, wording or witnessing can lead to intestacy, unnecessary tax, or assets ending up in the wrong hands.

Gifting property

Gifting property is another area where people can be caught out. Giving your home to your children but continuing to live in it can trigger inheritance tax rules that effectively ignore the gift. Even well-intentioned plans can fall apart without clear agreements, market-value rent, or properly structured ownership.

Family Investment Companies

The discussion also covered the use of trusts and family investment companies. These can be powerful tools, but they require regular reviews, administrative upkeep and careful planning to avoid unexpected tax charges. With changes to business and agricultural property relief coming in April 2026, there is still time to act, but the clock is ticking.

Watch Now

Contact us

If you have questions, we would be happy to help. Please contact us at enquiries@wellerslawgroup.com or call 020 7481 2422

Inheritance Tax Planning Update – Live Webinar

Posted on March 24, 2025April 8, 2025 by Wellers

We invite you to join us and Gravita for our ‘Inheritance Tax Planning Update’ webinar on Wednesday 30th April at 9am, presented by Wellers Private Client Solicitor, Aarti Gangaramani and Gravita Private Client Tax Partner, Michaela Lamb

The webinar follows the Government’s Spring Statement which we hope will finally bring clarity as to which of the much talked-about changes to the Inheritance Tax regime, Rachel Reeves intends to implement. This webinar is your opportunity to get the most up-to-date information on how to protect your loved ones.

DATE: Wednesday 30th April 2025
TIME: 9am – 10am

We’ll discuss everything you want to know about Inheritance Tax, from a jargon-free accounting and legal perspective.

What happens if you die without a Will? Does setting up a trust really avoid Inheritance Tax?

During the session we’ll cover common myths and misconceptions from the everchanging landscape of inheritance planning, and what you can do to protect yourself.

Topics will include:

Business Property Relief and Agricultural Property Relief
The impact of the new tax residency rules
Importance of the preparation of Wills and how the intestacy rules can impact your estate
Administration of Trusts and how they work in practice
Assets in foreign jurisdictions, having parallel Wills in place and the re-sealing process

To secure your spot, please register using the button below. After registering, you will receive a confirmation email containing information about how to join the webinar.

By signing up to this webinar, you agree to share your data with Wellers and Gravita, for the purpose of contacting you about relevant content and services

Are you ready for the 2025 Stamp Duty Land Tax Changes?

Posted on January 23, 2025August 12, 2025 by Wellers

The 2025 Stamp Duty Land Tax (SDLT) changes are an important topic in UK property law.

Stamp Duty Land Tax (or SDLT) is a tax payable to HMRC when an individual or corporate entity buys property or land in England and Wales (in Wales, it’s called the Land Transaction Tax).

SDLT uses thresholds for the calculation, so you pay an increasing percentage rate of SDLT according to the property’s value. How much you pay also depends on factors including whether you’re a first-time buyer, whether you will own any other property anywhere else in the world at the date of completion, and whether you’re a non-UK resident.

In her most recent Budget statement, the Chancellor of the Exchequer announced changes to SDLT, which will come into force on 1st April 2025. If you’re buying or considering buying a property at the moment, these changes could have a significant effect on the amount of SDLT payable.

First time buyer – SDLT up to 31st March 2025

If you’re a first-time buyer purchasing a property valued at less than £625,000, currently you would pay no SDLT up to £425,000 but 5% on the portion between £425,001 and £625,000. If the purchase price is over £625,000, then first-time buyer’s relief cannot be claimed

If you’re buying an additional property, other rates of SDLT will apply.

First time buyer – SDLT from 1st April 2025

The Chancellor announced significant changes to Stamp Duty Land Tax in her latest Budget. In most cases, it will result in purchasers paying more in SDLT.

Under the new rules coming into effect on 1st April 2025, a first-time buyer will not pay SDLT on a purchase price up to £300,000, with 5% SDLT due upon the portion from £300,001 to £500,000. If the purchase price is over £500,000 then first-time buyer’s relief cannot be claimed.

Why you need a good conveyancer ?

Stamp Duty Land Tax can appear quite complex, particularly if you’re a first time buyer or you’re not making a standard property purchase. When you buy a property, you rely on your solicitor to calculate the SDLT on your transaction and transfer it to HMRC in time, so you can avoid a fine.

Having a good conveyancing solicitor in your corner has never been more important.

For more information on how the Stamp Duty Changes might affect you, visit the Government website here

Life Interest Will Trusts

Posted on December 24, 2024August 8, 2025 by Wellers

When planning your estate, a life interest will trust can provide income for loved ones while preserving capital for future beneficiaries. Understanding the tax implications and how these trusts work is essential for effective estate planning.

What is a life interest trust?

A life interest trust (sometimes called an Interest in Possession Trust) gives a beneficiary the right to receive all income from trust assets for a specified period – often their lifetime. Unlike discretionary trusts, trustees must pay out all income and cannot accumulate it within the trust.

Key features of life interest trusts:

The income beneficiary (life tenant) has an absolute right to trust income
Capital is preserved for future beneficiaries (remaindermen)
Commonly used to provide for surviving spouses while protecting children’s inheritance
Can include property, investments, or other income-producing assets

The life tenant receives income after taxes and expenses. Despite the name, a “life” interest doesn’t always last a lifetime – it might end at a specific age, on remarriage, or another triggering event. When the life interest ends, capital passes to the remaindermen.

A right to occupy property rent-free also creates a life interest, even though no income is generated. Trustees often have powers to advance capital to beneficiaries if needed, providing flexibility.

How does a life interest trust work?

Life interest trusts operate on a simple principle: separating the right to income from the right to capital.

Example: Sarah leaves her estate in a life interest will trust for her husband John, with their children as remaindermen. John receives all rental income from properties and dividends from investments during his lifetime. When John dies, the children inherit the capital.

This structure achieves several goals:

John has financial security for life
The children’s inheritance is protected
Assets are shielded from potential remarriage claims
Tax planning opportunities are available

Life interest trusts and inheritance tax

Understanding the relationship between life interest will trusts and inheritance tax is crucial for estate planning. The treatment depends on who receives the life interest and when it ends.

Inheritance tax on creation

Spouse exemption: Life interests for spouses or civil partners are exempt from inheritance tax, just like outright gifts.

Non-UK domiciled spouses: Limited to £325,000 exemption if the deceased was UK domiciled.

Other beneficiaries: Life interests for anyone else are chargeable transfers, potentially subject to 40% inheritance tax.

Tax on the life tenant’s death

When the life tenant dies, the trust assets are treated as part of their estate for inheritance tax purposes – even though they only received income, not capital.

The calculation includes:

The life tenant’s personal assets
The value of trust assets (or their share if partial)
Less any debts
Standard inheritance tax exemptions apply

Important advantage: Unlike discretionary trusts, life interest will trusts avoid 10-year anniversary charges and exit charges.

Life interest trust pros and cons

Before choosing a life interest will trust, consider these advantages and disadvantages:

Pros:

Income security for the life tenant
Capital protection for remaindermen
No 10-year inheritance tax charges
Spouse exemption available
Can qualify for residence nil-rate band
Protects against sideways disinheritance

Cons:

Life tenant taxed on all income at their rates
Limited flexibility once established
Trust assets included in life tenant’s estate
Administrative costs and complexity
Potential family conflicts
Capital gains tax implications

Life interest trust disadvantages in detail

While life interest trusts offer benefits, understanding the disadvantages helps you make informed decisions:

Inflexibility: Once created, the life tenant’s right to income is absolute. Trustees cannot withhold income even if the life tenant becomes financially irresponsible.

Tax burden: The life tenant pays income tax on all trust income at their marginal rates, which could push them into higher tax brackets.

No accumulation: Unlike discretionary trusts, income cannot be accumulated for future needs or reinvested to grow capital.

Relationship tensions: Conflicts can arise between life tenants wanting income and remaindermen wanting capital growth.

Administrative burden: Ongoing costs include trust tax returns, professional fees, and potential disputes requiring legal intervention.

What happens when a life interest ends?

A life interest can end during the life tenant’s lifetime through:

Reaching a specified age
Remarriage (if stated in the trust)
The life tenant giving up their interest
Other triggering events in the trust deed

Tax implications of ending a life interest

Assets leaving the trust: Usually a potentially exempt transfer (PET) – no immediate tax but the life tenant must survive seven years.

Exceptions:

Transfer to spouse: Exempt
Transfer to the life tenant: No tax

Trustees typically pay any tax due, though the life tenant’s estate may become liable.

Creating a new life interest: Immediately chargeable at 20% on amounts over the nil-rate band.

Life interest trust tax implications

Life interest will trusts face specific tax treatment across income tax, capital gains tax, and inheritance tax. Understanding these implications helps with planning.

Income tax treatment

Trust tax rates:

Rental income: 20%
Interest: 20%
Dividends: 7.5%

These rates apply regardless of income levels. No personal allowances or dividend allowances apply.

Important: Trust management expenses cannot be deducted before calculating tax.

Life tenant taxation: The life tenant receives income with tax credits and includes it on their tax return. They can reclaim tax if their personal rate is lower than the trust paid.

Life interest trust capital gains tax

When trustees dispose of assets, capital gains tax may apply. Key points include:

Annual exemption: £6,150 (half the individual allowance)
Shared between multiple trusts from the same settlor
Special reliefs may be available (Business Asset Disposal Relief, Investors Relief)
Tax-free uplift on the life tenant’s death

Principal Private Residence Relief: Available if beneficiaries occupy trust property as their main home.

Life interest will trust cost

The costs of establishing and running a life interest will trust include:

Initial costs:

Legal fees for will drafting with trust provisions
Tax planning advice
Asset valuation if needed

Ongoing costs:

Annual trust tax returns
Accountancy fees
Investment management (if applicable)
Legal advice for significant decisions
Property maintenance (if property held)

While costs vary by complexity, life interest will trusts are generally less expensive to run than discretionary trusts due to simpler tax treatment and fewer compliance requirements.

Life interest trust explained – practical examples

Understanding how life interest trusts work in practice helps clarify their benefits:

Example 1 – Second marriages: David has children from his first marriage and marries Susan. His life interest will trust gives Susan the right to live in the family home for life, with the property passing to his children on her death. This balances Susan’s security with the children’s inheritance.

Example 2 – Vulnerable beneficiaries: Mary’s son has learning difficulties. Her life interest will trust provides him with income for life while protecting the capital from potential financial abuse. Professional trustees manage the investments.

Example 3 – Business assets: Tom owns a successful company. His life interest will trust allows his wife to receive dividend income while his children (who work in the business) ultimately inherit the shares.

Life interest will trust taxation – key considerations

When planning life interest will trust taxation, consider:

The life tenant’s existing income and tax position
Whether spouse exemption applies
Potential for capital gains on trust assets
The seven-year rule for lifetime transfers
Available reliefs and exemptions
Professional trustee requirements

Get expert advice on life interest will trusts

Life interest will trusts offer valuable estate planning opportunities but require careful consideration of tax implications and family dynamics. Our experienced private client team can help you understand whether a life interest will trust suits your circumstances.

We advise on:

Choosing between life interest and discretionary trusts
Inheritance tax planning strategies
Protecting vulnerable beneficiaries
Second marriage planning
Business succession arrangements
Wills and probate matters

Contact our specialist team on 020 3993 4988 or email wellers.wealth@wellerslawgroup.com