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The principal charge (known also as the ‘10-yearly charge’ or ‘periodic charge’) is an inheritance tax (IHT) charge levied on trustees of certain trusts. It is applied every 10 years and is calculated using a complex formula that is based on the value of the assets within the trust at that point. 

The periodic charge applies to the trustees of ‘relevant property trusts’. This is an IHT category for trusts which has its own charging regime. Since the law changed, in 2006, most trusts are relevant property trusts, for the purposes of IHT. All discretionary trusts will be relevant property trusts, as well as many lifetime trusts. Broadly, only life interest trusts created on death and disabled person’s trusts will not fall within this regime.  

The first occasion of periodic charge will be on the 10-year anniversary of the commencement of the trust.  

The commencement of the trust is usually the date at which the settlor (the