Skip to main content
  • What We Do
    • Investment Management
    • Financial Planning
    • Trust and Tax
    • International investment
    • Greenbank - Ethical and sustainable investment
    • Asset Management
    • PERSONAL INJURY AND COURT OF PROTECTION
  • Our Clients
    • Individuals and Families
    • Charities
    • Financial Advisers
    • Professional INTERMEDIARIES
    • Entrepreneurs
  • About Group
    • About us
      • Rathbones Group
      • Saunderson House
      • Our Purpose
      • Partnerships
      • Our Offices
      • Events
        • All events
        • Financial awareness courses
      • Our story
    • Responsibility
      • Responsible Business
      • Responsible Investment
      • Climate Reporting
      • Reports
    • Investors
      • Investor Relations
      • Reports and Results
      • Shareholder Information
      • Investment Case
      • Financial Calendar
      • Share Price Information
      • Contacts and Offices
    • Governance
      • Group executive committee
      • Board Committees
      • Directors
      • Policies
      • Articles of association
      • Corporate Governance
    • Media Centre
    • Careers
      • Vacancies
      • Investing in our people
      • Working at Rathbones
      • Your Career
      • Early Careers
    • Our People
  • RATHBONES
  • Insights
    • Knowledge and Insight
    • Rathbones Review Winter 2025
    • Know Where Life Can Take You
    • Insights
      • Investment insights
      • Investment Reports
        • Polls apart: Navigating America’s divisive election
        • Investing for the next decade
        • Peace of mind in a dangerous world
        • Building a more sustainable future
        • The Cloud Revolution
      • Financial Planning Insights
      • Financial Wellbeing Research
      • Responsible investment insights
      • Earth Convention
    • Podcasts
      • Financial Planning Unlocked
      • Inspired Minds
      • Inspired Sounds
  • Contact
    • Contact Us
    • Our Offices
  • Client Portals
    • About our client portals
    • MyRathbones Login
    • Rathbones Financial Planning Online Login
Home Home

Search

  • What We Do
    • Investment Management
    • Financial Planning
    • Trust and Tax
    • International investment
    • Greenbank - Ethical and sustainable investment
    • Asset Management
    • PERSONAL INJURY AND COURT OF PROTECTION
  • Our Clients
    • Individuals and Families
    • Charities
    • Financial Advisers
    • Professional INTERMEDIARIES
    • Entrepreneurs
  • About Group
    • About us
      • Rathbones Group
      • Saunderson House
      • Our Purpose
      • Partnerships
      • Our Offices
      • Events
        • All events
        • Financial awareness courses
      • Our story
    • Responsibility
      • Responsible Business
      • Responsible Investment
      • Climate Reporting
      • Reports
    • Investors
      • Investor Relations
      • Reports and Results
      • Shareholder Information
      • Investment Case
      • Financial Calendar
      • Share Price Information
      • Contacts and Offices
    • Governance
      • Group executive committee
      • Board Committees
      • Directors
      • Policies
      • Articles of association
      • Corporate Governance
    • Media Centre
    • Careers
      • Vacancies
      • Investing in our people
      • Working at Rathbones
      • Your Career
      • Early Careers
    • Our People
  • RATHBONES
  • Insights
    • Knowledge and Insight
    • Rathbones Review Winter 2025
    • Know Where Life Can Take You
    • Insights
      • Investment insights
      • Investment Reports
        • Polls apart: Navigating America’s divisive election
        • Investing for the next decade
        • Peace of mind in a dangerous world
        • Building a more sustainable future
        • The Cloud Revolution
      • Financial Planning Insights
      • Financial Wellbeing Research
      • Responsible investment insights
      • Earth Convention
    • Podcasts
      • Financial Planning Unlocked
      • Inspired Minds
      • Inspired Sounds
  • Contact
    • Contact Us
    • Our Offices
  • Client Portals
    • About our client portals
    • MyRathbones Login
    • Rathbones Financial Planning Online Login
Home

Search

Personal injury trust asset swaps explained

David Chambers, senior associate – tax and probate at Kuits Solicitors, explains how asset swapping can protect former homes from assessment.

22 July 2022

Breadcrumb

  1. Home
  2. Knowledge and Insight
  3. Personal injury trust asset swaps explained

Article last updated 5 September 2023.

Assets which are held within a personal injury trust (PI trust) are disregarded for means tested assessment purposes. The funds in the PI trust must have derived from any payment made in consequence of a personal injury. PI trusts are therefore widely used to hold personal injury compensation awards (PI awards) to benefit from this disregard, either to avoid losing current means tested entitlements, or as a planning tool so that protection will be provided in future should means testing become a consideration, for example, DWP means-tested benefits or local authority funding for care.

Any new residential property to be purchased out of a PI award should be held as an asset of the PI trust, i.e., purchased in the names of the trustees to hold on the terms of the trust for the injured person. This means the property itself will be protected from means testing, either now or in the future. Although a main residence would be disregarded for assessment purposes if held outside a PI trust whilst it is occupied as a residence, it could become an assessable asset in future, for example, if the injured person moved out but did not immediately sell the property and purchase a replacement or, went into care. A residence will be assessed after a 26-week disregard period from moving out. If a property is sold, then unless it is held in the PI trust, the proceeds of sale will be immediately subject to assessment. It is therefore important for all new property purchases to be made by the PI trust.

However, any property which is no longer the main residence, which was not purchased using the PI award and is not held in the PI trust, will be subject to assessment on sale or after 26 weeks from moving out.

"Although a main residence would be disregarded for assessment purposes if held outside a PI trust whilst it is occupied as a residence, it could become an assessable asset in future."

This is quite a common scenario. For example, someone may receive a PI award and need to purchase a new house as soon as possible to enable them to make the adaptations they need so that it is suitable for their requirements. They already own a home, but it is no longer suitable, and they cannot wait to sell it first, or the new house needs adapting before they can move in, so a simultaneous sale and purchase is not practical. Alternatively, they may wish to retain their former home and keep it as an investment. Unless they are able to transfer the former home to the PI trust, it will become subject to assessment from 26 weeks after moving out and any rental income received from the former property would also be assessed. On sale, the proceeds would be immediately assessed. This could mean all means tested entitlements would stop – or they would lose the ability to claim in future, due to the increased value of their capital.

The former property cannot be simply transferred to the PI trust by the owner because the property does not represent funds paid in consequence of a personal injury. However, an asset swap can be undertaken whereby a share of the new property, which is an existing asset of the PI trust, is swapped for the previous property, so that it becomes an asset of the PI trust before it is sold.

The process would be as follows:

1. A new property ‘A’ is purchased using PI award in PI trust. Existing home ‘B’ which was acquired before injury is retained

2. When ready to move out, former property B is then transferred to the PI trust in exchange for a share of new property A. For example:

  • If new property A is bought for £1 million and property B is worth £250,000, transfer property B to PI trust in exchange for 25% of property A. Ownership would be:
    • Property B: 100% PI trust
    • Property A: 75% PI trust; 25% own name directly
  • 25% of property A now held directly is not assessed as the main residence

3. If Property B is later sold or rented out, proceeds of sale or rental income pay to PI trust bank account and protected from assessment.

The property swap can also be completed if the former home was held jointly, for example by husband and wife, one of whom is the injured person with a PI trust. This would work as follows:

  • Transfer previous property B to PI trust in exchange for 25% of new property A
  • Ownership would then be:
    • Property B: 100% PI trust
    • Property A: 75% PI trust; 12.5% injured party; 12.5% spouse

Stamp Duty and Tax (SDLT) needs to be considered if there is more than one owner of the existing Property B. This is because the spouse / non-injured party is (in the above example) purchasing a 12.5% share of Property A from the PI trust in exchange for their 50% share of Property B, and the PI trust (i.e. the injured person for tax purposes) is purchasing 50% of Property B from the non-injured person in exchange for a 12.5% share of Property A. If Property B is worth £250,000 then there is no SDLT as a 50% share is worth £125,000, i.e., the SDLT rate is 0% between £0 and £125,000. However, if Property B was worth more than £250,000, then SDLT would be due at the applicable rates on the two transactions. The additional 3% rates for SDLT could also apply (where an interest in another residential property is held) but there is a specific exemption from the additional rates where there is a transfer of interests between spouses / civil partners. Other joint owners would be liable to the additional rate SDLT if the value of their share exceeded £40,000. In all cases, SDLT returns will still need to be filed even if there is no SDLT to pay where the values transferred exceed £40,000.

No SDLT arises if the former property was solely owned by the injured person as there will be no change in their beneficial ownership of the properties for tax purposes.

If another property other than the former main residence is exchanged, then Capital Gains Tax may need to be considered with respect to the share of the non-injured person.

Despite the potential for tax to be payable in some circumstances, it is often still worthwhile undertaking the property swap when comparing the tax cost with the potential total loss of means tested benefits if the former property was retained in personal ownership.

A property swap needs a PI trust as an entity to hold the disregarded property, but the swap exercise can still be available to those subject to a deputyship, if a PI trust can be created by the deputy to reflect the terms of the deputyship into which the property purchased using PI Funds can be transferred prior to then undertaking the swap exercise.

Where PI award have been used to redeem mortgages on existing properties held outside the PI trust, an equivalent share of the property can be assigned to the PI trust. This will protect that proportion of the property from assessment, and potentially a greater amount will be sheltered from assessment due to a discount to the valuation of the remaining share held personally. Again, SDLT should be considered where a co-owner is involved.

Important: Information in this article is provided by the author and Rathbones do not take responsibility for information contained.

For further information view Rathbones’ specialist personal injury and Court of Protection services.

Related articles

  • Court of Protection and conveyancing – a guide for practitioners
  • What to look for when choosing an investment manager

Popular Articles

image of shipping containers in a shipping yard from above
4 April 2025

Trump’s tariffs: how should investors respond?

Stock markets have reacted badly to the worse than expected news on US trade policy. We favour a more conservative asset allocation in response – but it’s possible to be too gloomy.

Find out more

5 mins

Black wire-framed spectacles, a white calculator and a gold pen lie on a light blue accounting ring-binder folder
6 May 2025

Review of the week: End of an era

Arguably the best investor of all time has decided to retire at the end of the year. Meanwhile, UK interest rates are forecast to fall in a bid to prop up the economy.

Find out more

6 mins

Golden crown on black background
7 April 2025

Review of the week: The emperor's new tariffs

Markets are tumbling fast in response to US tariffs that will upend global trade. Perhaps more dangerous than the policy itself is just how silly it makes the administration look.

Find out more

9 mins

MOST READ
  1. Trump’s tariffs: how should investors respond?

  2. Review of the week: End of an era

  3. Review of the week: The emperor's new tariffs

  4. Review of the week: Gloves off?

  5. A spring statement on fiscal discipline

Let's Talk

Ready to start a conversation? Please complete our enquiry form, we look forward to speaking with you.

Enquire
  • Important Information
    • Modern Slavery Statement
    • Important information
    • Complaints
    • Privacy
    • Accessibility
    • Climate Reporting
    • Cookies
    • Cookie Preferences
    • Sitemap
  • Other information
    • Financial Services Compensation Scheme
    • Financial Ombudsman Service
    • Scam Smart
    • Keeping our clients safe
    • MiFID II Cost and Charges FAQ
    • Statement of Cost and Charges
    • Banking Services
    • Interest Rates
    • Consumer Duty Manufacturer Request for Information
Address

Rathbones Group Plc
30 Gresham Street
London
EC2V 7QN

© 2025 Rathbones Group Plc
Incorporated and registered in England and Wales.
Registered number 01000403

Follow us
Facebook Instagram LinkedIn Twitter Youtube

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.