Glossary · UK
What is Exit Charge (Trust)?
An Inheritance Tax charge that can arise when capital leaves a relevant property trust, calculated on the period since the last ten-year anniversary or the trust's creation.
Full Definition
An exit charge (also called a proportionate charge) is an Inheritance Tax charge that may apply when capital is distributed out of, or otherwise ceases to be held in, a relevant property trust - typically a discretionary trust. It complements the ten-year periodic (principal) charge that such trusts face. The amount depends on the value leaving the trust, the time elapsed since the trust's creation or its most recent ten-year anniversary (measured in complete quarters), and the trust's effective rate of tax, which is itself derived from the nil-rate band available to the trust. The maximum rate cannot exceed 6%, and many exits attract little or no charge where the trust value sits within the nil-rate band (the standard NRB is GBP 325,000 for 2026/27). Exit charges matter because they can create unexpected liabilities and reporting duties for trustees, so distributions should be timed and valued carefully, often with professional advice.