Accumulation of Income in a Will Trust: What the Law Allows in 2026
The Perpetuities and Accumulations Act 2009 removed almost all restrictions on accumulating trust income for post-2010 trusts. For modern wills, trustees can accumulate for up to 125 years — subject to income tax and the s31 maintenance power.
Legislative Timeline
Thellusson Act 1800
Thellusson Act 1800First statutory restriction on accumulation. Prohibited accumulation beyond the lives of persons living at the testator's death, 21 years after their death, or the minority of persons living at the testator's death. Applied to existing and future trusts.
Applies to: Pre-1926 trusts only (later replaced by LPA 1925)
LPA 1925 ss164–166
Law of Property Act 1925Replaced Thellusson Act with 5 permitted accumulation periods: (1) the life of the grantor; (2) 21 years from the grantor's death; (3) the minority of beneficiaries living at the grantor's death; (4) the minority of anyone entitled under the instrument; (5) 21 years from creation of the settlement; (6) the minority of a living person at the death of the grantor.
Applies to: Trusts created between 1926 and 5 April 2010
PAA 2009 ss13–14
Perpetuities and Accumulations Act 2009Abolished the old accumulation period rules for instruments taking effect on or after 6 April 2010. Accumulation is now permitted for the entire trust period (up to 125 years under s5 PAA 2009) — subject only to the rule that income that ought to be paid out must still be paid.
Applies to: Trusts created on/after 6 April 2010 — including most modern wills
Frequently Asked Questions
Can trustees of a will trust accumulate income under the current law?
For will trusts created under wills executed or taking effect on or after 6 April 2010, the Perpetuities and Accumulations Act 2009 removed almost all restrictions on the accumulation of income. The PAA 2009 repealed the old accumulation period rules in ss164–166 Law of Property Act 1925, and replaced them with a simple rule: accumulation is permitted for the duration of the trust period, which under s5 PAA 2009 may be up to 125 years. There is no longer a fixed list of short permitted periods. The only remaining limits are: (1) trustees must pay income that they are legally obliged to pay out (for example, income to which a beneficiary with a vested interest is entitled, or income that should be applied under s31 Trustee Act 1925); (2) income tax consequences of accumulation must be considered; (3) the accumulation must be within the objects of the trust.
What were the old LPA 1925 accumulation periods and do they still apply?
The Law of Property Act 1925 ss164–166 previously imposed six permitted accumulation periods, of which only one could be chosen for a given instrument: (1) the life of the grantor; (2) 21 years from the death of the grantor; (3) the minorities of persons living or en ventre sa mère at the time of the death of the grantor; (4) the minorities of persons who, under the limitations of the instrument, would, for the time being, if of full age, be entitled to the income accumulated; (5) 21 years from the date of making an inter vivos settlement; (6) the minorities or respective minorities of lives in being at the making of the settlement. Any accumulation outside these periods was void — excess income fell to be paid to those entitled to it. These rules still apply to trusts that were created before 6 April 2010 — the PAA 2009 reforms are not retrospective. For a modern will trust, the LPA 1925 rules are no longer relevant.
How does s31 Trustee Act 1925 affect accumulation of income in a will trust?
Section 31 Trustee Act 1925 gives trustees of a will trust a statutory power of maintenance: they can apply trust income for the maintenance, education, and benefit of a minor beneficiary. Any income not applied must be accumulated (invested and added to capital). When the minor reaches 18, any accumulated income that has not been applied vests in them. If the minor's interest is contingent (e.g. 'to X at 25'), accumulated income goes to X at 25 if they reach that age, or to the estate if they die before 25. Section 31 is a significant practical restriction on how long income can be accumulated for minors: it overrides any discretion to accumulate beyond the minority period unless the will expressly excludes or modifies it. Trustees should distinguish between accumulation under s31 (for the benefit of minors) and general power to accumulate under the trust deed.
What are the income tax consequences of accumulating trust income?
Accumulated trust income has specific UK income tax treatment. Discretionary trusts (which accumulate income at trustee discretion) pay income tax at the trust rate — 39.35% on dividends and 45% on other income — under ITTOIA 2005. Beneficiaries who receive accumulated income from a discretionary trust receive a tax credit for the tax already paid at trust rate, and may claim a repayment if they are non-taxpayers or basic-rate taxpayers. Interest in possession trusts (where a beneficiary has a vested right to income) are taxed differently — the life tenant is treated as entitled to the income and taxed on it personally. Where income is accumulated in an interest in possession trust (e.g. directed by the will to be accumulated rather than paid to the life tenant), a special tax analysis is required. The income tax rate within trusts means accumulation may be less efficient than direct payment for higher-rate taxpayer beneficiaries.
Does the 125-year trust period under PAA 2009 also apply to the perpetuity rule?
Yes. The Perpetuities and Accumulations Act 2009 introduced a single statutory perpetuity period of 125 years for all new trusts and wills taking effect on or after 6 April 2010. Before the PAA 2009, the perpetuity period was either a common law period (measuring by the lives of specified persons plus 21 years) or a fixed 80-year period under the Perpetuities and Accumulations Act 1964. The 2009 Act abolished both of those in favour of the simpler 125-year statutory period. Under the 2009 Act, a trust that has not vested within 125 years becomes void for perpetuity — but the wait-and-see rule (introduced in 1964 and retained in 2009) means the trust is not void from the outset: the court waits to see whether it vests in time before declaring it void. For most family will trusts (trusts for children and grandchildren), the 125-year period is far longer than needed and the old rules are of academic interest only.
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