HMRC Contacts Trustees Over Trust Tax Return Errors

HMRC Contacting Trustees Over Potential Trust Tax Return Errors

HMRC is writing to some trustees after identifying potential errors in recent Trust and Estate Tax Returns relating to the classification of certain trusts.

The latest compliance campaign focuses on trusts where trustees indicated that the trust was not an accumulation or discretionary trust. HMRC believes that, in some cases, the trust may have been incorrectly categorised, which could mean tax has been calculated using the wrong rates.

Why Does Trust Classification Matter?

The type of trust determines how its income is taxed. Accumulation and discretionary trusts are generally subject to higher rates of Income Tax, including:

• 39.35% on dividend income
• 45% on most other forms of income

If a trust has been incorrectly reported, there may be additional tax to pay, together with interest and, in some circumstances, penalties.

However, not all discretionary trusts are subject to these special trust rates, which is why it is important to review the trust's specific circumstances before taking action.

What Should Trustees Do?

If you receive a letter from HMRC, it is important not to ignore it.

Trustees should:

• Review the relevant Trust and Estate Tax Returns carefully.
• Confirm whether the trust has been correctly classified.
• Respond to HMRC by 2 November 2026.
• Amend any incorrect 2024/25 returns and arrange payment of any additional tax due.
• Consider voluntary disclosure for errors relating to earlier tax years.
• Check that details held on the Trust Registration Service (TRS) remain accurate and up to date.

Changes to beneficiaries, trustees or other key trust information should always be reflected on the Trust Registration Service.

How Charlton Baker Can Help

Trust taxation can be complex, particularly where different trust structures and tax rules apply. If you have received a letter from HMRC, our specialist tax advisers can review your trust, assess whether any corrections are required and help you communicate with HMRC where necessary.

We can also support trustees with wider tax compliance, trust administration, and estate planning requirements, helping ensure affairs remain tax-efficient and fully compliant.

Call our specialist team on 01380 723692 or email here.