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Bare trusts for children: tax-efficient control and flexibility

If you want to put money away for a child but want to invest more than the Junior ISA limit of £9,000 a year or want more flexibility than a Junior ISA offers, then a bare trust could be an option.

Published on 26 Aug 20224 minute read

Written by Frances Bruce

The simplest of all trusts, a bare trust is a straightforward legal arrangement that gives you tax-efficient control over the money.

This article helps you get to grips with this classic, kid-friendly investment option and explains:

  • What a bare trust is
  • The tax rules of a bare trust
  • The difference between a bare trust and Junior ISA
  • How you can set up a bare trust

What is a bare trust?

A bare trust allows you to set aside assets of unlimited value for one person’s benefit. When you set up a bare trust you’re in control. You can:

  • Decide how much you want to save or invest
  • Choose the person who benefits
  • Access the money inside the trust when it’s needed for the benefit of that person
  • Appoint trustees (including yourself)

Trustees make the decisions, but a bare trust is all about looking after the beneficiary.

Anyone can contribute to a bare trust and – if you make the most of a bare trust’s tax rules – contributions can grow tax-free.

What are the tax rules for a bare trust?

A bare trust’s tax rules can help you grow larger investments tax-free. There are three main tax rules:

  1. The child is liable for capital gains tax but there will be no tax to pay if the gains realised each year are less than the child’s £12,300 allowance
  2. Income will be taxed against the parent if they fund the trust and the income exceeds £100
  3. If anyone else funds the trust then the income will be taxable against the child but again there’s no tax payable unless their income exceeds their allowances

Can a bare trust pay for a child’s education?

If one of your goals is to pay for a child’s private education or university fees, a bare trust is a good option because you can:

  • Pay in as much as you like
  • Access the money for the child when you need it
  • Get contributions from generous friends and relatives

Junior SIPPs and Junior ISAs lock the money away during childhood (and in the case of a SIPP until the child reaches 57). With a bare trust you have access to the money when you need it.

What’s the difference between a bare trust and a Junior ISA?

A bare trust and a Junior ISA are two different ways you can save money for a child. Our table sets out their limits, tax rules and access conditions:


Bare trust

Junior ISA

Annual limit





When the child turns 18

Capital gains tax

Beneficiary pays


Income tax

Beneficiary pays



Interesting fact about adult ISAs: your child can roll the entire amount accumulated in a Junior ISA into an adult ISA tax-free when they turn 18. But if you want to transfer money from a bare trust into an adult ISA you’re restricted to the £20,000 ISA annual allowance.

What you need know when you set up a bare trust

Bare trusts can help you set money aside for a child throughout their lives. When you set up a bare trust there are two things to know:

  1. A beneficiary can demand the money held in bare trust after they turn 18 – if you’re uncomfortable with this, a bare trust might not be the right option for you
  2. You need to register your bare trust with HMRC to avoid a fine, you should register your bare trust within 90 days of set up. You’ll need the bare trust set up details and the unique reference number – the URN – if you were given one when you set up the bare trust

Set up a bare trust for a child with Bestinvest

It’s easy to set up a bare trust at Bestinvest. Give us a call on 020 7189 2400 and our friendly, knowledgeable team can help you get started.


Important information

Nothing in this article is intended to constitute advice or a recommendation, and you should not take any financial decision based on its content. If you are in doubt as to any course of action you should seek professional advice. Prevailing tax rates and reliefs depend on your individual circumstances and are subject to change. ISA rules may also change. Investors should always remember that investments go down as well as up and they may not get back the amount originally invested.



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