Practitioners habitually use "bare trust", "nominee", and "trust" as if they were synonyms. They are not. The three sit on the same legal-title-versus-beneficial-ownership spectrum, but they carry materially different tax-transparency profiles, legal-protection profiles, and Trust Registration Service (TRS) disclosure profiles. The competitor content that introduces a property investor to this space habitually muddies the distinction; ETC Tax's bare-trust explainer states "a bare trust is basically a nominee agreement", and deedoftrust.co.uk's HMRC-guidance page treats the two as functionally identical. For most readers the conflation is harmless. For property investors making real decisions about how to hold a buy-to-let bought for a child, an overseas buyer choosing how to hold UK title, or a spouse documenting an unequal beneficial split, the distinction drives whether minor-child rental income gets attributed back to the parent, whether the asset enters the relevant property regime with 10-year charges, and whether the trustees are running on a 90-day TRS clock.

This page draws the bright-line three-axis comparison and applies it to the three commonest property-investor scenarios. The three axes are tax, legal protection, and disclosure. The three arrangements are bare trust, nominee company (a bare trust dressed in corporate clothing), and formal trust (the separate-tax-entity alternative).

The three arrangements at a glance

Quick map before the detail. Each row is one feature, each column one arrangement.

  • Legal title: Bare trust: in the trustee (often a parent). Nominee company: in the nominee company. Formal trust: in the trustees of the settlement.
  • Beneficial ownership: Bare trust and nominee: in the named beneficiary, absolutely. Formal trust: in the trust as a separate equitable entity (discretionary beneficiaries have only an expectancy).
  • Tax transparency for income tax: Bare and nominee: transparent under ITA 2007 s.466(3)(b)-(c); beneficiary returns the income. Formal trust: opaque; trust returns its own income at trust rates (45% additional rate on non-dividend income, 39.35% on dividend income; the £1,000 ITA 2007 s.491 trust standard rate band was omitted by FA(No.2) 2023 from 6 April 2024 and replaced by a £500 trust tax-free amount under Sch 1A ITA 2007, reduced to £100 per trust where the settlor has settled 5 or more trusts).
  • Tax transparency for CGT: Bare and nominee: transparent under TCGA 1992 s.60; beneficiary uses own AEA and rates. Formal trust: opaque; trust pays at the trust residential rate (24% post-30 October 2024) with half-AEA.
  • IHT entry: Bare and nominee: PET (potentially exempt transfer); seven-year clock runs from gift date. Formal discretionary trust: CLT (chargeable lifetime transfer); 20% entry charge on value above NRB.
  • IHT ongoing: Bare and nominee: property in beneficiary's estate from gift date; no trust-level periodic charges. Formal discretionary trust (post-22 March 2006): relevant property regime; 10-year periodic charge up to 6% under IHTA 1984 s.64.
  • TRS registration: Bare and nominee where holding UK land: required under MLR 2017 reg 45ZA, 90-day clock from creation. Formal trust: required regardless of land holding for any UK express trust.
  • Creditor exposure of underlying asset: Bare and nominee: asset is the beneficiary's; the beneficiary's creditors can reach it. Formal discretionary trust: trustees hold; discretionary beneficiaries have only an expectancy, not a property interest; substantial protection from beneficiary's creditors.

The bare trust at root: TCGA 1992 s.60 and ITA 2007 s.466

The bare trust is the statutory baseline against which everything else is measured. Two pieces of legislation do the structural work.

TCGA 1992 s.60 handles CGT: "In relation to property held by a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee, or for any person who would be so entitled but for being an infant or other person under disability ... this Act shall apply as if the property were vested in, and the acts of the nominee or trustee in relation to the property were the acts of, the person or persons for whom he is the nominee or trustee (acquisitions from or disposals to him by that person or persons being disregarded accordingly)." The trustee is invisible for CGT. Acquisitions by the trustee are treated as acquisitions by the beneficiary, with the beneficiary's base cost. Disposals by the trustee are treated as disposals by the beneficiary, at the beneficiary's CGT rate, with the beneficiary's AEA. The trustee files no CGT return on the property; the beneficiary returns the gain on their self-assessment.

ITA 2007 s.466 handles income tax. Subsection (2) defines "settled property" as property held in trust other than property excluded by subsection (3). Subsection (3)(b) excludes "property held by a person as trustee for another person who is absolutely entitled to the property as against the trustee", and subsection (3)(c) extends that to minors who would be absolutely entitled if not for the disability of minority. The consequence: property in a bare trust is not "settled property" for income-tax purposes. The trust-rates regime under ITA 2007 Part 9 does not apply; the income is the beneficiary's income at the beneficiary's marginal rate.

Three corollaries flow out of the s.60 / s.466 architecture. First, the beneficiary's tax position is identical to direct ownership for all income-tax and CGT purposes, save where a separate anti-avoidance rule (notably ITTOIA 2005 s.624 settlements legislation, and s.629 minor-child attribution) attributes the income elsewhere. Second, the bare trust is invisible for IHT excluded-property purposes; the asset is the beneficiary's at general law and forms part of the beneficiary's death estate from the gift date. Third, the bare trust mechanism is structurally simple and self-administering: no annual trust returns, no trust-rate calculations, no separate trust-AEA accounting.

A nominee company is a bare trust wearing corporate clothing. The legal title to the property is held by an incorporated entity (often a £1 share-capital private limited company with one or two corporate directors) on bare trust for the underlying beneficial owner. The s.60 / s.466 transparency analysis runs exactly as it does for a parent-as-bare-trustee arrangement: the company's acts are deemed the beneficiary's acts; the rent is the beneficiary's income; the gain on disposal is the beneficiary's gain. HMRC manual TSEM9170 reflects this position.

What changes is the operational packaging. Property investors use nominee companies for three distinct reasons.

  1. Public-record anonymity. The Land Registry reveals the legal owner. Where the beneficial owner does not want their name on a publicly searchable register (high-profile individuals, certain commercial investors, individuals concerned with privacy in family arrangements), holding through a nominee company displaces the beneficial owner's name from the public record. The nominee company's beneficial owners are now disclosed instead on Companies House (under the People with Significant Control regime since 6 April 2016, extended to overseas entities under the Register of Overseas Entities since 1 August 2022), so the layer of privacy is not absolute, but the Land Registry search shows the company, not the individual.
  2. Operational convenience for overseas investors. An overseas buyer can hold UK property through a UK nominee company that handles agent communications, signs documents in the UK, collects rent into a UK bank account, and deals with local administration without the beneficial owner having to travel. The nominee structure is also useful for ongoing succession planning: the beneficial-ownership documentation can be amended without triggering a Land Registry transfer, although TRS registration must follow.
  3. Separation in offshore-reporting jurisdictions. Some overseas reporting regimes treat property held through a corporate vehicle differently from property held directly, even where the corporate vehicle is a bare-trustee nominee. Investors structuring their UK exposure to fit those reporting regimes use nominee companies for the disclosure-classification reason rather than any UK-tax reason.

What the nominee company does not change is the UK tax position. ATED applies at the beneficial-owner level where the property is residential and above the £500,000 threshold. Non-Resident CGT under TCGA 1992 ss.1A-1G applies at the beneficial-owner level on disposal. The Annual Tax on Enveloped Dwellings rules treat the nominee company as the chargeable person if it is a UK company, but the bare-trust analysis means the underlying beneficial owner remains the economic taxpayer. The nominee is not the income-tax taxpayer on the rents; the beneficial owner is.

The formal trust: a separate taxpayer with its own regime

A formal trust (discretionary, interest-in-possession, accumulation, or any other structured settlement) is structurally different. Property held in a formal trust is "settled property" for income tax under ITA 2007 s.466(2); it is settlement property for CGT under TCGA 1992 s.68; and (for trusts settled on or after 22 March 2006, save the IPDI / disabled-person / transitional-serial-interest carve-outs at IHTA 1984 s.49(1A)) it is in the relevant property regime for IHT.

The tax consequences:

  • Income tax inside the trust: a discretionary trust pays at the trust rate (45% on most income above the £500 standard rate band introduced from 6 April 2024, reduced from the previous £1,000) and at the dividend trust rate (39.35%) on dividend income. When the trustees distribute, the beneficiary receives the distribution net of a 45% tax credit and can reclaim where their marginal rate is lower. An interest-in-possession trust passes the income through net of the trust's basic-rate liability; the beneficiary returns the income at their marginal rate and reclaims the basic-rate credit.
  • CGT inside the trust: trustees pay at the trust residential rate (24% post-30 October 2024 on residential gains, 20% on non-residential) with an AEA of £1,500 for 2026/27 (half the personal £3,000, divided across trusts created by the same settlor down to a £300 floor). Holdover under TCGA 1992 s.260 is available on chargeable transfers in (i.e. transfers to a non-settlor-interested relevant property trust) but blocked where the trust is settlor-interested under ss.169B-169G (see our separate page on the settlor-interested three-statute trifecta).
  • IHT inside the trust: entry charge at 20% (lifetime rate, half the death rate) on value above the settlor's available NRB. 10-year periodic charge up to 6% under IHTA 1984 s.64. Exit charges on capital distributions between anniversaries under IHTA 1984 s.65.

The formal-trust regime is what the bare-trust route is structured to avoid. Where the family is comfortable with the trust-level tax cost (in exchange for the trustee-governance benefits, the protection from beneficiary creditors, and the ability to defer capital distributions past majority), the formal trust route fits. Where the family wants the simplicity of full transparency and is happy with the beneficiary holding outright, the bare trust route fits.

Axis 1: tax treatment in detail

The income-tax baseline is set out above. Three property-specific points warrant emphasis.

First, the bare-trust transparency does not block ITTOIA 2005 s.629 attribution on minor-child rent. A parent who gifts a BTL share to their minor child via bare trust still has the rent attributed back to the parent under s.629, subject to the £100 per-settlement de-minimis. The bare-trust mechanism is a CGT and IHT transparency device; it does not affect the income-tax-attribution analysis. Practitioner content commonly gets this wrong. Our separate page on the settlements legislation walks the s.624 / s.629 mechanism in full.

Second, the s.60 CGT transparency means each bare-trust beneficiary uses their own annual exempt amount. For a parent who holds a BTL on bare trust for a minor child, the child has full AEA against any disposal during minority (£3,000 for 2026/27). The same gain held inside a discretionary trust would access only half-AEA (£1,500 for 2026/27, divided across the settlor's trusts down to £300 minimum).

Third, the residential CGT rate applied at the trust level (24% from 30 October 2024) compares unfavourably to a basic-rate beneficiary's 18% personal rate. Where the beneficiary's marginal rate is below 24% in the year of disposal, the bare-trust route is materially cheaper than the formal-trust route on the same gain. Where the beneficiary's marginal rate is above 24% (a higher-rate-band individual disposing of residential property at the 24% additional-rate residential rate), the rate gap closes.

This is the axis where the formal trust earns its costs. In a bare trust or nominee arrangement, the underlying property is the beneficiary's at general law. Their creditors can reach it (in bankruptcy, in matrimonial proceedings, in personal-injury or commercial litigation judgments). The bare trust adds nothing to the protection profile that direct ownership would not provide; the trustees are a paper-thin layer that affects who holds the legal title but not who is exposed.

In a formal discretionary trust, by contrast, discretionary beneficiaries hold only an expectancy. The trustees own the property in equity and at general law; no individual beneficiary has a property interest until and unless the trustees exercise their discretion to make a distribution. Creditors of a discretionary beneficiary cannot reach the underlying trust property; they can only claim against actual distributions once made (typically by attaching the distribution payment at the moment of receipt). For families using trusts in part for asset-protection reasons (a beneficiary with a high-risk profession, a beneficiary at risk of matrimonial breakdown, a beneficiary at risk of bankruptcy), the formal discretionary trust delivers protection the bare-trust route cannot.

The protection has limits. The trust must be genuine (no sham), the settlor must not retain control such that the trust is a nominee for the settlor (the so-called Jasmine Trustees line of cases), and the trustees must actually exercise discretion rather than rubber-stamp the settlor's instructions. Where these tests are met, the protection holds even where the settlor and the beneficiary are closely related. Where they are not met, the courts can look through the trust and treat the asset as the beneficiary's (or the settlor's) outright.

Axis 3: disclosure obligations and the 90-day TRS clock

The Trust Registration Service (TRS) is the third axis, and the one most often overlooked. Money Laundering Regulations 2017 reg 45ZA, inserted by SI 2020/991 with effect from 6 October 2020, requires registration of any UK express trust that acquires an interest in UK land, regardless of whether the trust pays tax. The category catches bare trusts and nominee arrangements over land, formal trusts, and declarations of trust between spouses where they create an undivided-share express trust.

Mechanically:

  • Trigger: the trust acquires a beneficial interest in UK land. Acquisition can be by purchase, by gift, by declaration of trust over previously-held land, or by inheritance.
  • Deadline: 90 days from creation for trusts created after 6 October 2020. Pre-existing trusts holding UK land at 6 October 2020 should have registered by 1 September 2022. Subsequent changes (new trustees, change of named beneficiary, change of beneficial-interest share) must be notified within 90 days.
  • Information: trustees' details, settlor's details (including date of birth and country of residence), beneficiary details (named beneficiaries for bare and IIP trusts; class description for discretionary trusts), and the underlying asset description.
  • Penalty: up to £5,000 for failure to register or failure to keep the register up to date. HMRC's published approach is graduated: a first inadvertent breach typically attracts a warning letter and a deadline to register; deliberate or repeated failures attract the full penalty. The TRS regime is monitored by HMRC's trusts service and cross-checked against Land Registry and SDLT filings.
  • Exclusions: Schedule 3A of the MLR 2017 carves out specific narrow categories (statutory trusts, pension scheme trusts, charitable trusts, will trusts during the administration period, co-ownership trusts where legal and beneficial owners are identical). The exclusions are narrow; in particular, the co-ownership-trust exclusion falls away once spouses execute a declaration of unequal beneficial shares.

For property investors using a bare-trust or nominee structure to hold UK land, TRS registration is not optional. The 90-day clock starts running on the day the structure is in place; missing the clock is a £5,000-exposure event, and any subsequent change of beneficial share resets the 90-day notification window. The compliance overhead is one of the standing costs of the structure.

Application 1: parent buying for a minor child

A landlord parent who wants to buy a BTL for a minor child cannot put legal title in the child's name. Settled Land Act 1925 s.1 read with the Trusts of Land and Appointment of Trustees Act 1996 structures all freehold and leasehold estates so that a minor cannot hold legal title to land in England and Wales; a conveyance to a minor takes effect as a trust in their favour. The bare-trust route is therefore the default: the parent buys the property in their own name and executes a declaration that they hold it on bare trust for the named child.

The tax stack on this arrangement:

  • Income tax: rental income is the child's income for s.466 purposes (the child is absolutely entitled), but ITTOIA 2005 s.629 attributes the rent back to the parent-settlor at the parent's marginal rate, save for the £100 per-settlement de-minimis. The bare-trust mechanism does not block s.629.
  • CGT on disposal during minority: the child's gain, with the child's AEA (£3,000) and the child's CGT rate (typically 18% basic-rate or 24% higher-rate; many minors have no other income and sit at basic-rate).
  • IHT on the gift: PET; seven-year clock from gift date. The gift falls back into the parent's estate if the parent dies within seven years. If the parent survives seven years, the gift drops out of the estate entirely.
  • IHT on the child's death: the property is in the child's estate from the gift date. This is rarely a real concern (children dying within the IHT-relevant timeframe is statistically rare), but it is a feature of the structure.
  • TRS: 90-day clock from the declaration of bare trust.

The grandparent-route variant changes the income-tax answer materially. Where a grandparent (not parent) holds the BTL on bare trust for the minor grandchild, the grandparent is the s.629 settlor; attribution is to the grandparent, not to the parent. Where the grandparent is retired or basic-rate, the s.629 outcome is materially better than a parent-route gift. Our forthcoming page on minor-child gifts walks the grandparent route in full.

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Application 2: overseas buyer using a UK nominee company

A non-UK-resident individual buying UK residential property typically considers two routes: direct ownership in their personal name (with the property visible on Land Registry under their name) or holding through a UK nominee company (with the company visible on Land Registry and the individual disclosed at Companies House via the PSC / overseas-entities register).

The tax stack is the same on both routes at the beneficial-owner level. ATED applies to high-value residential property regardless of whether held directly or through a nominee. Non-Resident CGT under TCGA 1992 ss.1A-1G applies on disposal at the beneficial-owner level. UK rental income is reported under the Non-Resident Landlord Scheme regardless of structure (the agent or tenant withholds basic-rate tax unless HMRC has issued an NRL approval for gross-receipt status).

What the nominee route changes is the disclosure profile. The Register of Overseas Entities (effective 1 August 2022) requires any overseas entity holding UK land to register at Companies House and disclose its beneficial owners. A nominee company that is itself UK-incorporated falls outside the overseas-entities register but is on the PSC register at Companies House. The TRS registration also applies (the nominee is a bare trustee, so the trust is registrable under reg 45ZA). The cumulative disclosure stack is heavier than direct ownership; the nominee route is suited to investors who value operational convenience and ring-fencing over disclosure minimisation.

Application 3: joint purchase with one name on title

The third common application is the spouse or partner scenario: one spouse on the Land Registry title (often for mortgage-affordability reasons), both spouses contributing to the purchase, and a declaration of trust recording the actual beneficial shares. The structure at general law is a bare trust: the on-title spouse holds legal title on bare trust for both spouses in the declared beneficial shares.

This is the lane of our existing page on declaration-of-trust mechanics. The declaration of trust is the document that records the share; the underlying structure is a bare trust. The s.60 and s.466 transparency runs as it would for any other bare trust. For income tax between spouses, the ITA 2007 s.836 default of 50/50 applies regardless of the declared beneficial shares until displaced by Form 17, but the actual beneficial entitlement (and therefore the CGT and IHT analysis) is whatever the declaration of trust records.

The structural decision in this scenario is whether to layer a formal trust over the declaration of trust. For most spousal arrangements the bare-trust-by-declaration route is the right answer: it is simple, transparent, fits the income-tax 50/50 default plus Form 17 mechanism cleanly, and avoids the formal-trust regime entirely. Where the spouses want to add asset-protection or governance-flexibility features (rare for primary-residence ownership, more common for substantial BTL portfolios held jointly), the formal-trust route becomes a candidate.

Where the three arrangements fit in the four-vehicle pillar

This page sits one level down from our pillar on putting rental property into a trust, which maps four vehicles (IPDI by will, lifetime discretionary trust, bare trust, FIC) across the three-tax stack of IHT, CGT, and SDLT entry charges. This page zooms in on the bare-trust column of that pillar and unpacks it into two sub-arrangements (bare trust proper, nominee company) plus the formal-trust alternative. Readers exploring the trust-route question at the top level should start with the pillar; readers who have decided that the trust-shape arrangement is right for their facts and need to choose between the three sub-shapes should use this page.

The relationship to our FIC vs Discretionary Trust comparator is similar. That page handles the formal-discretionary-trust-versus-corporate-vehicle binary. This page handles the bare-versus-nominee-versus-formal trinary inside the trust column. The two comparators sit beside each other in the cluster, each addressing a different cut of the decision.

Decision rule of thumb

Five hand-rules that get most property investors to the right starting point.

  1. Buying for a minor child: bare trust, default. Consider grandparent-route variant if s.629 income-tax attribution to the parent is a concern. Formal trust only if the parent has a specific asset-protection concern or wants to defer access past age 18.
  2. Overseas buyer wanting UK title: nominee company if operational convenience and Land-Registry-record displacement matter; direct ownership otherwise. Either way, the underlying UK tax position is the same.
  3. Joint purchase with unequal contributions: declaration of trust between spouses or co-owners, bare-trust mechanism. Formal trust only where a specific governance or protection feature is needed.
  4. Mid-life landlord doing IHT planning on substantial value: formal discretionary trust if the latent CGT gain is large enough to justify the 20% entry IHT in exchange for s.260 holdover, and the family is comfortable with the 10-year periodic charge regime. Bare trust if simplicity is preferred and the entry CGT is manageable.
  5. Beneficiary in a high-risk profession or with matrimonial uncertainty: formal discretionary trust for asset-protection reasons, even at the cost of the regime overhead.

Five mistakes to avoid

  1. Drafting a "bare trust" that is actually a discretionary trust. A deed that defers vesting to age 25 or that gives trustees any discretion as to who benefits has crossed the line from bare to formal. The structure then attracts entry IHT (if a CLT), 10-year periodic charges, and trust-rate income tax. The fix is precision in the deed: the beneficiary is absolutely entitled from the start, with the trustees having no discretion as to who benefits or in what shares.
  2. Assuming bare-trust transparency blocks s.629. It does not. ITTOIA 2005 s.629 attributes minor-child trust income to the parent-settlor regardless of whether the trust is bare or formal. Bare-trust transparency operates on the income-tax routing for adults and the CGT routing for all beneficiaries; the s.629 hook is separate.
  3. Missing the 90-day TRS clock. The clock starts on the day the trust is created and runs for 90 days. Trustees who do not register face up to £5,000 in penalties per trust. The cost is low (registration is free; the time burden is around an hour for a straightforward case) but the omission is common.
  4. Using a nominee company without analysing the disclosure stack. The nominee company route adds Companies House PSC disclosure and (for overseas entities) Register of Overseas Entities disclosure on top of the TRS clock. The cumulative disclosure profile is heavier than direct ownership, not lighter. Investors who pick nominee for "anonymity" reasons frequently end up with more public disclosure than they would have had with direct ownership.
  5. Treating bare trust as asset protection. A bare trust does not protect the beneficiary's property from the beneficiary's creditors. The beneficiary is the absolute owner; their creditors can reach the asset. Where asset protection is the goal, the formal discretionary trust is the structure, not the bare trust. Selecting bare trust for protection reasons gets the goal and the structure mismatched.

Closing the loop

The three-arrangement decision is structural. Once a conveyance has completed and the trust documentation has been executed, undoing the decision normally triggers SDLT, can trigger CGT, and (for formal trusts already in the relevant property regime) can trigger an exit charge. The right time to make the choice is before the structure is in place. The bare trust suits simplicity, transparency, and minor-child PET-clock starting. The nominee company suits operational convenience for overseas buyers and Land-Registry anonymity. The formal trust suits asset protection, governance flexibility, and substantial-value IHT planning where s.260 holdover is on the table. The three-axis framework above is the test; the application of the framework to a specific set of facts is what the structuring conversation is for.