15 January 2026
IFS Tax Law Review Committee discussion paper on Tax & Disability in the UK
A new IFS Tax Law Review Committee discussion paper, authored by Paul Brice, examines the UK’s current tax and disability trust framework and argues for a broader, more accessible range of long-term savings options for disabled people and their families.
For many families and carers, disability raises profound concerns about future financial security, often extending decades ahead. There is a strong and understandable desire to ensure that funds will be available to meet a disabled person’s needs over the long term. However, transferring funds directly to a disabled individual is not always straightforward. Challenges may arise around mental capacity, appropriate stewardship of assets, and the potential loss or reduction of means-tested benefits and care entitlements.
The UK has a well-established regime for trusts for disabled people, similar to arrangements found in several other jurisdictions. These trusts can offer significant tax advantages, including the ability for income and gains to be taxed as if they belong to the disabled beneficiary, rather than at the higher rates normally applied to trusts.
Despite these benefits, the new discussion paper highlights that disability trusts can be complex and costly to establish and administer. In addition, the qualifying conditions for disabled trusts are not always well understood, increasing the risk of errors. In some cases, misunderstandings of the tax rules have led to prolonged and expensive litigation.
The discussion paper finds that the existing trust regime has value and recommends that it should continue – but suggests some reforms. These include the publication by HMRC of an approved “model trust deed” for trusts for disabled people, aimed at reducing errors, improving compliance, and providing clearer guidance for trustees and advisers.
Crucially, the paper also argues that trusts alone are not sufficient. To widen access to long-term savings arrangements, it proposes the introduction of an additional, simplified savings vehicle specifically designed for disabled people, without the complexity and cost associated with trusts.
Such a reform, the paper concludes, would help ensure that the peace of mind that comes from setting aside funds for the future of a disabled child or relative is available to a far broader range of families — not just those with the resources to establish and maintain complex trust structures.
Paul Brice, author of the report, said:
“Worrying about the future of someone who cannot provide for themselves can become overwhelming especially when it is not known what public support will be available for them in years to come. Savings may not be the answer for everyone – but the case for offering a broad range of savings options seems compelling.”
Emma Chamberlain, who is a member of the TLRC and has extensive trust expertise, said:
“This paper highlights that trusts are often only appropriate for wealthier families with a disabled child. Parents with modest estates can be forced into leaving their assets to other children on death and trusting them to “do the right thing” – simply because the cost and complexity of a formal disability trust are prohibitive. A simplified savings vehicle would be a gamechanger, offering a regulated, lower-cost alternative that provides these families with the same security and peace of mind currently reserved for the well-off. It is a common-sense reform that aligns the UK with international best practices.”
Judith Freedman, Chair of the TLRC, said:
“This discussion paper highlights the complexities that face families attempting to provide for their disabled relatives and offers proposals for making the existing disability trust regime easier to operate and for an alternative, simpler and more accessible regime to be made available. At a time when state provision for the disabled is a matter of concern and debate, it makes sense to consider how to make it easier for families to make their own provision. The TLRC hopes that this paper will stimulate consideration and debate and it welcomes comments and suggestions.”
You can read the full report here.
