• Tax planning for school fees


    The legal way to pay school fees from company dividends or property income.

01

Welcome to Tower Trusts

A Tower Trust is a legal arrangement where money or assets are set aside usually by grandparents for the benefit of their grandchildren. The trustee is able to distribute this money before the grandchild turns eighteen, to assist with the cost of school fees.

  • The Settlor - the grandparent(s), who transfers assets to the trust.
  • The Trustee - the parent(s), who manages the assets.
  • The Beneficiaries - the grandchildren, who benefit from the trust.

There is generally no tax to pay as long as the income generated by the trust is within each grandchild’s personal tax allowance of £12,500.

alastair gordon

Founder of Tower Trusts

02

Benefits of a Tower Trust

Tower Trusts offer a number of benefits which include the following.

Tax free income


Income from a Tower Trust is taxed as belonging to the beneficiaries. This allows usage of their own personal tax allowances of up to £12,500 per beneficiary.

Suitable for school fees


The trustee can distribute trust income to cover beneficiary's school fees. At age 18, beneficiaries have a right to the trust, so it's not recommended for large sums.

Inheritance tax saving


If the grandparent survives the gift to the trust by seven years, the value of the gift falls outside their estate for inheritance tax purposes.

03

How it works

We use technology to streamline the creation and management of trusts in order to reduce setup costs and increase accessibility.

Trust Creation


The Tower Trust deed is created as a binding legal document that contains all the details of the trust which includes the name of the settlor(s), trustee(s), beneficiary(s) and asset(s). Assets can include shares in listed or unlisted companies, property, cash, or other types of investment.

Trust Management


Management of your Tower Trust is via our online portal. You can create new trusts or modify the asset(s) or trustee(s) for existing trusts. Once a trust is established, the beneficiaries can’t be changed, nor can their percentage share of entitlement be altered.

04

Create a free account

The first step is to create a free no-obligation account. Once you have an account you can view further information on Tower Trusts along with associated costs and next steps.

05

Structure examples

Shown below are some examples of how your Tower Trust can be structured to receive cash, shares (dividend income) or property (rental income).

  1. Grandparent (Settlor) transfers funds to the Trust.
  2. Parent (Trustee) pays school fees from the Trust's funds.
  3. Grandchild (Beneficiary) inherits remaining funds on 18th birthday.
  1. Grandparent (Settlor) buys shares in Ltd company (keep under £12,300 - seller's CGT annual allowance).
  2. Grandparent (Settlor) gifts these shares to the Trust. (Inheritance tax fee - if gift is survived by 7 years.)
  3. Trust receives the dividend payments on these shares (£12,500 tax free allowance per beneficiary).
  4. Parent (Trustee) pays school fees from the Trust's dividend income.
  5. Grandchild (Beneficiary) inherits these shares on 18th birthday (Shares can be sold prior to 18th birthday).
  1. Grandparent (Settlor) gifts property (or a % of a property) to the Trust. (Inheritance tax fee - if gift is survived by 7 years.)
  2. Trust receives rental income for this property (£12,500 tax free allowance per beneficiary).
  3. Parent (Trustee) pays school fees from the Trust's rental income.
  4. Grandchild (Beneficiary) inherits the property on 18th birthday (The property can be sold prior to 18th birthday).
06

FAQ

This Trust FAQ will hopefully answer some of your questions.

A Tower trust is a bare trust which is a simple, legal document. Assets (e.g. investments) are held by a trustee, for the benefit of a beneficiary (usually a child). There is no limit on what or how much can be put into a Tower Trust.

One of the most common uses for a Tower Trust is where grandparents want to set aside funds for their grandchildren's education. If the funds are given away early and the grandparents survive seven years, then this gift will be outside the inheritance tax charge on their deaths.

A Tower Trust can be gifted shares in any private company. You may be able to claim Gift Hold-Over Relief if you give away business assets (including shares). Gift Hold-Over Relief means: you do not pay Capital Gains Tax when you give away the assets. More info

If the parent is the initial shareholder, the shares should be first gifted to the grandparent and then on-gifted to the Trust to comply with Trust tax legislation.

A Tower Trust can receive an entire property or a percentage of a property. The transfer of the property constitutes a disposal of assets and may have a Capital Gains Tax liability. Stamp duty is only payable if the property has a mortgage attached to it. If it does, the recipient will have to pay stamp duty on the outstanding value of the mortgage.

If the parent is the property owner, the property should be first gifted to the grandparent and then on-gifted to the Trust to comply with Trust tax legislation. There should be no additional CGT as the property won't have increased in value and no additional Stamp duty, providing the property is mortgage free.

Income tax. Providing it falls within the child's allowances, there will be no tax to pay on income. Most children can 'earn' up to £18,500 per year without incurring tax (personal allowance of £12,500, starting rate for savings of up to £5,000 and personal savings allowance of £1,000). The one exception to the rule above concerns gifts (assets) put into trust by a parent. If the income from these exceeds £100 per year, it will be taxed at the parent's marginal rate and the parent will have to declare it on their own Self Assessment tax return. Parents may therefore prefer to invest in assets that do not generate an income. This is one reason the Tower Trust (bare trust) arrangement tends to be preferred by grandparents.

Capital gains tax (CGT). Most children also have a Capital Gains Tax (CGT) Annual Exemption of £12,100. This means that when trustees come to sell investments to pay for a child's school fees or other needs, there will be no tax to pay on gains up to this amount. Any gains above the allowance will be taxed at 10% (or 20% on any gains falling into the higher rate tax bracket) and are usually paid by the trustees.

One thing to consider is that transferring investments you already hold into a Tower Trust is treated as a disposal of the assets - so you may have to pay CGT if they have risen in value while you have held them.

However, there would be no CGT to pay when the child eventually takes ownership of the assets at age 18, as they are already the beneficial owner (unless they sell the investments).

Inheritance tax (IHT). Assets paid into the trust will either fall within the annual IHT exemption (up to £3,000 a year which is exempt immediately), the small gifts or 'gifts out of excess income' exemptions, or be a Potentially Exempt Transfer (PET). A PET is dependent on the donor surviving seven years beyond making the gift for it not to form part of their estate for IHT purposes. If the donor does not survive seven years, the beneficiary may need to pay IHT and, again, it will fall to the child's parent or legal guardian to ensure this happens.

Please be aware, if the child passes away the bare trust will form part of their estate and, under the intestacy rules, their parents will inherit the assets and IHT may be due.

Stamp duty is payable by the receiver of the gift, but only if the property has a mortgage attached to it. If it does, the recipient will have to pay stamp duty on the outstanding value of the mortgage.

More info

If the shares are gifted and no consideration is paid, a stamp duty gift exemption relief can be claimed which is likely to reduce the stamp duty costs to nil. You don't need to fill in a Stock Transfer Form where no consideration is given for the shares.

More info

If the annual income from the trust is in excess of £2,500 per beneficiary, then the trustees are responsible for submitting an annual tax return on behalf of each beneficiary. You can download a Tax Summary report from the Tower Trust portal to assist you or your accountant with this tax return.
Firstly, the assets in a Tower Trust are taxed as if they belong to the beneficiary. The beneficiary of a Tower Trust is usually responsible for declaring any income or gains through Self Assessment. However, if the beneficiary is a minor, it falls to the child's parents or legal guardians to complete a Self Assessment tax return on their behalf. It is therefore important that the trustees keep records of all the transactions within a Tower Trust. In most cases, tax can be paid out of the trust. You can download a Tax Summary report from the Tower Trust portal to assist you or your accountant with this tax return.
If you set up a Tower Trust for a child, then you are legally obliged to tell them about it, (if they don't already know) when they turn 18. Assuming some assets remain in the Tower Trust, the child becomes absolutely entitled to them. However, there is no automatic 'transfer' of the assets to the beneficiary.

There are also no tax changes, unless income was being taxed at the parent's marginal rate in which case it will revert to the child's. The new adult will also be responsible for completing their own tax return.
Yes - as long as each beneficiary is absolutely entitled to their share of the trust's assets. Trustees must not change the shares or use the income from one beneficiary's share to benefit another.
A Tower Trust holding very valuable assets isn't a good choice for a child with limited life expectancy. The value of the trust assets is included in their estate, so if the child dies young and is intestate (which is most likely), there's the potential for a substantial inheritance tax charge.
We currently offer an email only based support system. This allows us to keep our operational costs low and pass these savings back to our customisers in the form of low trust setup and management costs.
All Tower Trust deed templates have been legally ratified by an independent UK law firm as being legal documents within England and Wales law. The proper law of all Tower Trust deeds shall be that of England and Wales and all rights under this Trust and its construction and effect shall be subject to the jurisdiction of and construed according to the Law of England and Wales unless the Settlor indicates that they wish the proper law of the Trust to be the Law of Scotland.
The simplicity of a Tower Trust does have its disadvantages - one of which is the relative lack of control for the trustees.

A beneficiary of a the Tower Trust is entitled to take control of the trust assets (or their share of them) at 18. Many 18-year olds are happy to leave the assets with the trustees and follow their advice on how best to use the income and capital. But that's not always the case. The trustees may worry the money may be used irresponsibly, yet as long as the beneficiary has reached 18 and has mental capacity, the trustees must hand over the assets if the beneficiary asks for them.

Trustees can delay the beneficiary's capital entitlement, for example if the beneficiary was terminally ill. But these powers can only be used in exceptional circumstances. They're not something you should rely on if you're seriously concerned about what will happen when a beneficiary becomes entitled to capital at 18.

Alternative trust planning can be put in place prior to a beneficiary turning 18 which can look to dilute shares owned, or lock up available funds for a period of time, creating a zero value trust or introducing delayed/restricted access to the trust.
07

Pricing

We offer 3 pricing plans, Basic, Advanced (most popular) and Premium.

  • Basic Plan

  • £ 249

    setup fee

    • Trust deed
    • Trust bank account
    • Online account management
    • Annual tax summary
    • 1% transfer fee*
  • Create free account
  • Advanced Plan

  • £ 499

    setup fee

    • Trust deed
    • Trust bank account
    • Online account management
    • Annual tax summary
    • 0.5% transfer fee*
  • Create free account
  • Premium Plan

  • £ 999

    setup fee

    • Trust deed
    • Trust bank account
    • Online account management
    • Annual tax summary
    • 0% transfer fee*
  • Create free account

* Transfer fees are charged on payments to and from the Trust's bank account. e.g. receiving a rental/dividend payment or for the payment of schools fees.