This information is written for those with bare trusts which hold personal injury
compensation. There are other types of trust for personal injury compensation,
which are taxed differently. This solicitor practice only writes bare trusts, so we
will stick to those trusts.
- A bare trust is not taxed.
- The compensation held in a bare trust is not taxed.
- Tax is the personal responsibility of the person who set up the trust.
If the compensation held in a bare trust is invested, then any tax due will be paid by the compensated person who set up the trust. Don’t panic, as your
personal tax allowances will apply. Unless you invest significant funds, or find a
fantastic investment, it is unlikely tax will be payable. For a start, you are
allowed to earn interest of £1,000 tax free.
In the tax year 6 April 2023 to 5 April 2024, the standard Personal Allowance is
£12,570. This is the amount of income you can receive before you have to pay
Knowing when to file a tax return is not easy, so use the facility on the
The information above relates to income tax. The same applies to Capital Gains
Tax on a trust, which again is the personal responsibility of the person who set
up the trust. To quote the Government website, “Capital Gains Tax is a tax on
the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased
The trust will state how any remaining fund should be dealt with at your death.
That remaining fund will be treated as part of your estate for the purposes of
The trustees of a bare trust have no responsibility for tax, or for filing a tax
In the simplest terms, the money held in a bare trust is treated as yours for tax