The Capital Gains Tax (CGT) collected from trusts has grown by 27% to £1bn over the past year, according to data released by HMRC this month.

Despite this growth, the number of trusts submitting a tax return continued to fall.

The number of trusts filing a tax return fell by 3% year on year in the tax year ending 2022.

The number of trusts filing a return has fallen by 12% since 2017.

So far over 633,000 trusts and estates have registered with HMRC’s new online Trust Registration Service platform.

Three-quarters of registered and open trusts and estates were registered in the period between 1 April 2022 and 31 March 2023, when there were 462,000 new registrations

John Chew, pensions tax and estate planning specialist at Canada Life, said he expects trust to continue to gain in popularity.

He said: “Trusts held within insurance bonds, deemed as non-income producing from a tax perspective, will likely become increasingly popular as an alternative to income producing trusts.

“It’s interesting to note a disproportionate amount of 'interest in possession' trusts produced a high level of income, with 7% of interest in possession trusts with income over £100,000 producing £765m of income in the last tax year, around 71% of the tax receipts.”

Separate research from Royal London showed that 8 in 10 advisers "always or frequently" promote the use of trusts or beneficiary nomination to clients, but uptake among clients only reached 3 out of 10 last year.

Ensuring money gets to the right person (84%) and estate planning (64%) were the main drivers for financial advisers to discuss trusts with clients.

Jennifer Gilchrist, protection expert at Royal London, said: “The Consumer Duty requirements place a strong onus on advisers taking all reasonable steps to achieve good outcomes for their clients and their beneficiaries, removing any risks of the life cover proceeds not being paid to the intended recipients. 

“The findings are very clear, writing a protection policy in trust or under beneficiary nomination is already on advisers’ radar and is almost always a part of the conversation with a client. However, with such healthy numbers promoting trusts and beneficiary nomination, it begs the question why an active decision on who should benefit from life policies isn’t being made by more clients.”

Reacting to the latest figures from HMRC, Edward Grant, director of Technical Connection at St James’s Place, expressed concerns that there were still around half a million trusts not yet registered with the platform.

He said Financial Planners needed to make sure clients met their obligations registering for the new service.

He said: "HMRC is collating significant trust data with 455,000 trusts registering on its online Trust Registration Service platform. This has placed extra responsibilities on many trustees and their financial advisers. Overall 633,000 trusts are now registered on the TRS platform. While a record number of trusts were registered between 1 April 2022 and 31 March 2023 there are potentially half a million trusts that are still not registered on the TRS platform.

“Non-registration of a trust could result in a fine for the trustees. A recent FOI request submitted by St. James’s Place reveals that HMRC has already started issuing warning letters to trustees for noncompliance.

“The Trust Registration Service has proven to be difficult for vulnerable individuals to complete. Financial Planners have offered considerable support to their clients to help them meet their obligations, a non-financial benefit of advice.”

Yesterday, billionaire businessman Bernie Ecclestone was convicted of fraud having failed to declare a Singapore-based trust which held assets worth over £416m. He was sentenced to 17 months in jail, suspended for two years, and fined over £650m at Southwark Crown Court.

According to the new figures from HMRC, total income from trusts and estates in tax year ending 2022 was £3.07bn, moving above pre-pandemic highs where income was £3.05bn in the tax year ending 2020.

• Royal London surveyed 109 financial advisers in August.