Accumulation and Maintenance Trust

What is an accumulation and maintenance trust?

An accumulation and maintenance trust was a trust designed to hold assets for one or more children until they reached a specified age. Until then, no beneficiary had a fixed right to the income, and trustees could either accumulate it or apply it for a child's maintenance, education or benefit. It carried a privileged inheritance tax treatment that ordinary discretionary trusts did not (gov.uk, HMRC inheritance tax manual, as at July 2026, subject to change).

The appeal was that assets could be settled for children without the periodic and exit inheritance tax charges that apply to many discretionary trusts, provided the strict statutory conditions were met. Grandparents funding school fees, or parents providing for young children, were among those who commonly used them before the rules changed.

The conditions an A&M trust had to meet

An A&M trust had to satisfy tight conditions to gain its special status. In broad terms, one or more beneficiaries had to become entitled to the trust property, or to the income from it, on or before a specified age not exceeding 25, no beneficiary could have a present right to the income in the meantime, and any income not used for a beneficiary's maintenance, education or benefit had to be accumulated (gov.uk, HMRC inheritance tax manual, as at July 2026, subject to change).

A vesting age. A beneficiary had to become entitled on or before an age no greater than 25 (gov.uk, as at July 2026, subject to change).

No interest in possession. No beneficiary could have a fixed right to receive the income before then.

Accumulate or maintain. Income not spent on a child's maintenance, education or benefit had to be added to capital.

Where the beneficiaries were not all grandchildren of a common grandparent, a further 25-year limit could restrict how long the favoured treatment lasted (gov.uk, HMRC inheritance tax manual, 25 year test, as at July 2026, subject to change).

What changed on 22 March 2006

The Finance Act 2006 largely ended the special A&M regime. From 22 March 2006, new trusts could no longer be set up as A&M trusts with the old inheritance tax advantages, and most existing A&M trusts were brought within the mainstream relevant property rules unless they met new conditions (gov.uk, HMRC inheritance tax manual, as at July 2026, subject to change).

Existing trusts were given until 6 April 2008 to adapt. Broadly, a trust could keep favourable treatment if it was rewritten so beneficiaries became fully entitled by age 18, or it could become an 18-to-25 trust, though that route can bring some inheritance tax exit charges into play (gov.uk, HMRC inheritance tax manual, existing A&M trusts after 6 April 2008, as at July 2026, subject to change). Because the position is technical, trustees of an older trust often take advice.

The old A&M trust is now largely a historic structure. Trusts set up today for children generally use one of the routes covered below.

Trusts families use for children today

Because a fresh A&M trust can no longer be created with the old advantages, families providing for children now generally use one of a small number of alternatives. Two have their own favourable inheritance tax treatment, a bereaved minor's trust and an 18-to-25 trust, while others accept the standard relevant property rules in exchange for flexibility (gov.uk, trusts and inheritance tax, as at July 2026, subject to change).

Trust type	Broad feature	Inheritance tax note
Trust for a bereaved minor	For a child under 18 who has lost a parent or step-parent; child takes the assets by 18	Can escape the ten-yearly and exit charges where the conditions are met
18-to-25 trust	Child becomes fully entitled by 25	Avoids the ten-yearly charge, but exit charges may apply between 18 and 25
Discretionary trust	Trustees decide who benefits and when	Usually a relevant property trust, so entry, ten-yearly and exit charges can apply
Bare trust	Named child is the owner for tax; takes the assets at 18 (16 in Scotland)	Often a potentially exempt transfer, so may fall outside the estate after seven years

Trust type

Broad feature

Inheritance tax note

Trust for a bereaved minor

For a child under 18 who has lost a parent or step-parent; child takes the assets by 18

Can escape the ten-yearly and exit charges where the conditions are met

18-to-25 trust

Child becomes fully entitled by 25

Avoids the ten-yearly charge, but exit charges may apply between 18 and 25

Discretionary trust

Trustees decide who benefits and when

Usually a relevant property trust, so entry, ten-yearly and exit charges can apply

Bare trust

Named child is the owner for tax; takes the assets at 18 (16 in Scotland)

Often a potentially exempt transfer, so may fall outside the estate after seven years

A bereaved minor's trust can escape both the ten-yearly and exit charges where the assets are held for a child who has lost a parent and the child becomes entitled by 18. An 18-to-25 trust avoids the ten-yearly charge, but an exit charge may apply for the period the beneficiary is between 18 and 25 (gov.uk, trusts and inheritance tax, as at July 2026, subject to change). Which route suits a family depends on the aim, so it can be worth discussing with a qualified professional.

How these trusts are taxed

Where trustees accumulate income rather than paying it to a beneficiary, the trust is generally taxed like an accumulation or discretionary trust. Above a small tax-free amount, trustees pay 45% income tax on income other than dividends and 39.35% on dividends (gov.uk, trusts and income tax, as at July 2026, subject to change). A bare trust is different, with the child usually taxed as the owner.

The tax-free amount is normally £500, though it falls to £100 for each trust where the same settlor has set up five or more accumulation or discretionary trusts (gov.uk, trusts and income tax, as at July 2026, subject to change). On gains, most trusts have an annual exempt amount of £1,500 for the 2026 to 2027 tax year, or £3,000 for a vulnerable beneficiary, with 24% capital gains tax on gains above it (gov.uk, trusts and capital gains tax, as at July 2026, subject to change). Our guide to how trusts are taxed covers this in full.

A worked example (illustration only). Grandparents settled money years ago in what was then an A&M trust for their grandchild, and after the reforms the trustees rewrote it so the grandchild takes the fund at 18. This year the trust receives £4,000 of interest and the trustees accumulate it. After the £500 tax-free amount, £3,500 is taxable, and at the 45% trust rate that is £1,575 of income tax (gov.uk, trusts and income tax, as at July 2026, subject to change). Change the income, the number of trusts the settlor has, or the trust terms and the figure changes, so this is general information rather than a calculation for any real trust.

Once a trust becomes liable to income tax, capital gains tax or inheritance tax, trustees usually have to register it with HMRC through the trust registration service and file a trust tax return, and many trusts must register even without a tax liability (gov.uk, register a trust, as at July 2026, subject to change). Our note on the trust registration service covers that step. Any trust holding investments is a regulated area, and this is general information rather than advice, so an FCA-authorised adviser can help with the investment side.

The old accumulation and maintenance trust is largely history, but the aim behind it, providing for children in a controlled way, is still met through other trusts. The choice turns on the family's circumstances.

A&M trusts in Scotland and Northern Ireland

Inheritance tax, income tax and capital gains tax are UK-wide, so the A&M rules, the trust income tax rates and the trust capital gains allowance apply across Scotland, England, Wales and Northern Ireland alike (gov.uk, as at July 2026, subject to change). What differs is the surrounding trust and succession law. Scotland has its own law of trusts, and the age at which a child can be entitled to assets can differ, with a bare trust reaching the beneficiary at 16 in Scotland rather than 18 (gov.uk, types of trust, as at July 2026, subject to change). Where a trust touches more than one UK nation, it can be worth taking advice in each. For the wider picture, see our estate planning guide.

Frequently asked questions

Can you still set up an accumulation and maintenance trust?

Not with the old inheritance tax advantages. From 22 March 2006 a new trust can no longer qualify as the favoured A&M trust, and such trusts are largely a historic structure (gov.uk, HMRC inheritance tax manual, as at July 2026, subject to change). Families providing for children today generally use a bereaved minor's trust, an 18-to-25 trust, a bare trust or a discretionary trust instead, depending on their aims.

What is the difference between an A&M trust and a discretionary trust?

An A&M trust was a special type of trust for children that, before 2006, escaped the ten-yearly and exit inheritance tax charges many discretionary trusts face (gov.uk, as at July 2026, subject to change). A discretionary trust gives trustees ongoing choice over who benefits, but is usually a relevant property trust with those charges. Since 2006 the two have largely converged.

At what age did a child become entitled under an A&M trust?

Under the original rules a beneficiary had to become entitled to the property, or to the income from it, on or before a specified age no greater than 25 (gov.uk, HMRC inheritance tax manual, as at July 2026, subject to change). After the 2006 reforms, existing trusts that were adapted so beneficiaries took the assets by 18 could keep more favourable treatment, so the age often turns on when the trust was rewritten.

Do old A&M trusts pay the ten-year inheritance tax charge now?

Many do. Unless an existing A&M trust was adapted by 6 April 2008 to meet the newer conditions, it generally fell within the relevant property rules, which can bring a periodic charge at each ten-year anniversary and exit charges (gov.uk, as at July 2026, subject to change). Because the calculation is technical, trustees often take advice. Our guide to the trust ten-year charge explains the periodic charge.

How is income in an accumulation and maintenance trust taxed?

Where income is accumulated, the trust is generally taxed like an accumulation or discretionary trust, at 45% on income other than dividends and 39.35% on dividends, above a tax-free amount that is normally £500 (gov.uk, trusts and income tax, as at July 2026, subject to change). Income used for a child's maintenance can be treated differently, so the position depends on the trust's terms.

Should I set up a trust for my grandchildren?

That depends on your aims and circumstances, and this is general information rather than advice. Some families use a bare trust or an 18-to-25 trust to provide for grandchildren, while others prefer a discretionary trust for flexibility, each with its own tax profile (gov.uk, as at July 2026, subject to change). It can be worth discussing the options with a solicitor or a STEP practitioner. See our note on a trust for grandchildren.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

Accumulation and Maintenance Trusts