Can I Put My Main Residence Into a Trust?

• Putting your home into trust is legally possible, but usually ineffective
• It rarely removes the property from your estate for inheritance tax
• You may lose access to the Residence Nil Rate Band
• Rent payments create double layers of income tax
• Future property growth can become subject to capital gains tax
• It does not reliably protect against care home fees
• Alternative planning strategies are usually more effective

Your primary home where you normally live.

 A legal arrangement where assets are owned by trustees for the benefit of beneficiaries.

An additional inheritance tax allowance, currently up to £175,000 per person, available only if a qualifying residence is left to direct descendants.

A care fees concept where assets are given away or restructured with the intention of reducing what a person “owns” and would otherwise have to pay for care. If deprivation is found, the local authority can treat the asset as still belonging to the individual.

Inheritance tax and care fee planning are governed by substance over form. Simply placing a home into a trust does not remove tax or care exposure if you continue to benefit from it.

Not automatically. If you continue to live in the property, HMRC treats this as a gift with reservation of benefit unless full market rent is paid to the trust.

This means:

• The property remains in your estate for inheritance tax
• Paying rent creates additional tax issues rather than solving them

If you transfer all or part of your home into a trust and continue to live there, you must pay market rent.

That rent:

• Comes from your taxed personal income
• Is then taxed again inside the trust, often at 45 percent
• Can sometimes be reduced if distributed, but double taxation usually remains

This is rarely efficient and creates ongoing tax leakage rather than savings.

This is one of the most damaging consequences.

To use the Residence Nil Rate Band:

• You must own a qualifying interest in the property at death
• It must pass to direct descendants

If the property, or part of it, sits in trust:

• The allowance can be reduced or lost entirely
• Up to £175,000 per person of inheritance tax relief can disappear

This alone can outweigh any perceived benefit of the trust.

Your main residence is normally exempt from capital gains tax.

Once transferred into trust:

• That exemption is restricted or lost
• Future property growth can become taxable
• Trustees may face CGT on eventual sale or restructuring

You introduce a tax that did not previously exist.

Usually not, but this is often the reason people consider placing their home into trust.

If someone later needs long-term residential care, they worry that their home will be assessed and potentially sold to pay for those costs. By transferring the property into trust, the intention is to reduce their personal estate below a certain threshold, so that the state, rather than the individual, contributes towards the care fees. However, in practice, this approach is rarely effective, because authorities can argue deprivation of assets.

Local authorities can argue deprivation of assets if:

• The transfer was made to reduce care costs
• You continue living in the property
• There was a foreseeable need for care

There is no fixed time limit after which this concern disappears. If deprivation is established, the property can still be treated as belonging to the individual and assessed accordingly. 

The trust is effectively ignored for care fee purposes.

The biggest mistake is assuming that “trusts” and the “seven years” solve everything.

Trusts and the seven-year rule do not override:

• Gifts with reservation rules
• Deprivation of assets principles
• Loss of key allowances such as Residence Nil Rate Band
• Ongoing income tax consequences

Tax planning only works when ownership, control, and benefit are aligned.

In most cases, more effective alternatives include:

• Life insurance written in trust to cover inheritance tax
• Equity release combined with gifting strategies
• Business Relief qualifying investments
• Integrated estate and succession planning
• Proper use of nil rate bands and spousal exemptions

These approaches reduce tax without distorting ownership of your home.

Before considering a trust for your main residence, ask:

• Will I still live in the property?
• Can I afford market rent indefinitely?
• Am I prepared to lose the Residence Nil Rate Band?
• Am I creating new income or capital gains tax?
• Is my goal inheritance tax, care planning, or control?

If any answer creates uncertainty, a trust is unlikely to be appropriate.

• Transferring property solely for “seven-year rule” reasons
• Using trusts primarily to avoid care fees
• Ignoring income tax and CGT consequences
• Copying generic online trust structures
• Assuming trusts are automatically tax efficient

You can put your main residence into a trust. For most people though, it is a costly and unnecessary step, creating more problems than it solves.

Inheritance tax planning works best when it is strategic, integrated, and aligned with how you actually live. In almost all cases, there are cleaner, safer, and more effective ways to protect your family’s wealth without placing your home into trust.

Disclaimer. The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. UK tax legislation changes frequently, and the specific application of any rule or strategy depends on individual circumstances. Figures, thresholds, and reliefs mentioned are correct as of the 2026 to 2027 tax year unless otherwise stated. Before acting on any information here, consult a qualified adviser who has reviewed your full situation. Bluebond Tax Planning provides personal recommendations only under a signed client agreement, following a full review. Bluebond Tax Planning operates under UK legal frameworks and recognised professional conduct standards. Tax planning and legal work are not FCA regulated.