Is a personal injury trust taxed?

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 2024 to 5 April 2025, the standard Personal Allowance is
£12,570. This is the amount of income you can receive before you have to pay
income tax.


Knowing when to file a tax return is not easy, so use the facility on the
Government website.

The information above relates to income tax. The same applies to Capital Gains
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
in value.”

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
Inheritance Tax.



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




Related content



Responsibility of trustees 



Personal Injury trusts and how I can help
Personal injury trusts guide




Protect your compensation

Receiving interim or final compensation payment?

You may need a trust to protect benefits and local authority care.

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