Trustee Tax Liability on Property Acquisitions Under Settlement Rules

When individual trustees are treated as non-individuals for LTT higher rates

For Land Transaction Tax in Wales, individual trustees buying a dwelling through a settlement may be treated as if they were not individuals when deciding whether the higher residential rates apply. This usually matters where the trust beneficiaries do not have a right to live in the property for life and do not have a right to the income from it, so the trust purchase can fall within the higher rates rules even though the trustees are people rather than a company.

• The rule applies where a trustee or trustees of a settlement buy a major interest in one or more dwellings, and all the trustees are individuals.
• It only applies if, under the settlement, the beneficiaries are not entitled to occupy the dwelling for life and are not entitled to the income arising from it.
• If those conditions are met, the trustees are treated as the beneficial owners and the transaction is treated as if the trustees were non-individuals.
• This is commonly relevant to discretionary trusts and similar arrangements where no beneficiary has a fixed entitlement.
• You must still check the normal higher-rates conditions, including the £40,000 consideration threshold and whether any exclusion applies, such as certain long lease cases.

Scroll down for the full analysis.

When individual trustees are treated like non-individuals for LTT higher rates

This page explains a specific Land Transaction Tax rule for trustees who buy dwellings in Wales. In some cases, even though the trustee is an individual, the law treats that trustee as if they were not an individual when working out whether the higher residential rates apply. This matters because the higher rates can apply to a purchase by trustees even where the trustee is a person rather than a company.

What this rule is about

The rule deals with purchases of dwellings by trustees of a settlement. Normally, the higher rates regime looks closely at whether the buyer is an individual or a non-individual, because different parts of the rules can apply depending on that status.

Paragraph 31 of Schedule 5 addresses a particular trust situation. It applies where individual trustees hold a dwelling under a settlement, but the beneficiaries do not have the kind of direct rights that would make the trust look more like a life interest arrangement. In that case, the trustees are treated as the beneficial owners, and the transaction is treated in the same way as if the trustees were not individuals.

The practical effect is to stop certain trust purchases falling outside the higher rates rules simply because the trustees happen to be individuals.

What the official source says

The source says that this treatment applies where all of the following are true:

• a trustee, or trustees, of a settlement acquires a major interest in one dwelling or more than one dwelling, either alone or together with others who are not trustees;
• the trustee is an individual, or all the trustees are individuals; and
• under the terms of the settlement, the beneficiary or beneficiaries are not entitled to occupy the dwelling for life and are not entitled to the income arising from it.

If those conditions are met, the trustee is treated as the beneficial owner. The acquisition, holding, or disposal of the major interest is then treated as if the trustee were not an individual.

The source goes on to say that, where this rule applies, the acquisition of a major interest in a dwelling will be liable to the higher residential rates so far as the basic conditions for higher rates are met. It gives two examples of those basic conditions:

• chargeable consideration of £40,000 or more; and
• none of the exclusions applies, for example where the interest is not subject to a lease with more than 21 years left to run.

What this means in practice

If individual trustees buy a dwelling through a settlement, you cannot assume the purchase is analysed in the same way as an ordinary purchase by individuals. You must first ask what rights the beneficiaries have under the settlement.

If the beneficiaries do not have a life entitlement to occupy the dwelling and do not have an entitlement to the income from it, the trustees are treated as beneficial owners and are treated like non-individuals for this purpose.

That matters because the higher rates rules can then apply without needing to analyse the trustees simply as private individuals buying in their own personal capacity.

In practical terms, this rule is aimed at discretionary or similar trust arrangements where no beneficiary has the relevant fixed entitlement. It is not framed as a general rule for every trust purchase. The terms of the settlement are central.

How to analyse it

A sensible way to approach the issue is to work through these questions in order:

• Is there an acquisition of a major interest in a dwelling, or more than one dwelling?
• Is the buyer a trustee, or a number of trustees, of a settlement?
• Are the trustee or all trustees individuals?
• What do the settlement terms actually give the beneficiaries? In particular, are they entitled to occupy the dwelling for life, or entitled to the income earned?
• If the beneficiaries do not have those rights, the trustees are treated as beneficial owners and as if they were not individuals.
• Then ask whether the normal gateway conditions for higher rates are met, including whether the chargeable consideration is at least £40,000 and whether any exclusion takes the transaction outside the higher rates regime.

The key legal question is not simply “is the trustee an individual?” but “what sort of trust is this, and what rights do the beneficiaries have under it?”

Example

A discretionary trust has two individual trustees. They buy a dwelling in Wales for more than £40,000. Under the trust terms, no beneficiary has a right to live in the property for life, and no beneficiary has a fixed entitlement to the rental income.

On the source material, the trustees are treated as beneficial owners and the transaction is treated as if the trustees were not individuals. If the other conditions for the higher rates regime are met, and no exclusion applies, the purchase falls within the higher rates rules.

Why this can be difficult in practice

The main difficulty is working out exactly what rights the beneficiaries have under the settlement. Trust wording can be technical, and small differences in drafting may matter.

The source gives a clear outcome where beneficiaries are not entitled to occupy for life and are not entitled to income. But applying that test may still require careful reading of the trust deed. For example, it may not always be obvious whether a beneficiary has a true entitlement or only a possibility of benefit at the trustees’ discretion.

Another point is that this rule does not by itself decide every higher-rates question. Even if trustees are treated as non-individuals, you still need to check the wider higher-rates conditions and exclusions. The source itself mentions the £40,000 threshold and the exclusion for certain long lease situations.

Key takeaways

• Individual trustees can be treated as if they were non-individuals for LTT higher rates purposes.
• This depends on the terms of the settlement, especially whether beneficiaries have a life right to occupy or an entitlement to income.
• If the rule applies, you must still check the normal higher-rates conditions and any exclusions.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Trustee Tax Liability on Property Acquisitions Under Settlement Rules

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