Offshore trusts lost their protections on 6 April 2025. Domicile stopped mattering, the income and gains protections for non-domiciled settlors were repealed, and inheritance tax moved to a residence test — 10 out of the last 20 tax years. Excluded property status is no longer fixed when assets are settled; it is retested at every chargeable event.
What was abolished
From 6 April 2025 the concept of domicile is no longer relevant in determining how individuals are taxed in the UK. In its place sits a residence-based test, and the trust protections that made offshore structures attractive to non-domiciled settlors went with the old regime.
On the income side, sections 628A to 628C and 630A ITTOIA 2005 were repealed. Income arising under the settlement from 6 April 2025 is treated as the income of a UK-resident settlor under section 624 where the settlor retains an interest, or section 629 where income is paid to relevant children. The transfer of assets abroad protections went the same way: income is assessable on the transferor as it arises where they are UK resident and have power to enjoy it.
On the gains side, section 86 TCGA 1992 was amended for 2025/26 onwards — the settlor domicile condition was removed. Gains accruing to non-resident trustees are attributed to a UK-resident settlor who has an interest in the settlement, and domicile no longer enters the question.
The short version: foreign income and gains arising in the trust from 6 April 2025, whenever the trust was established, are taxed on the settlor on the same basis as they would be for a UK-domiciled settlor under the old rules.
The one relief that remains
A settlor who is a qualifying new resident under the four-year FIG regime can still claim relief, and this is now the main route to protection. Where the trustees' gain is a qualifying foreign asset gain, relief is available on a claim, and relieved gains fall into the section 87 pool rather than disappearing.
That is a four-year window for someone in their first four years of UK residence after at least ten years abroad — not a structural protection. It buys time; it does not replace what was lost.
Inheritance tax: the long-term resident test
An individual is a long-term UK resident if they have been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year in which the chargeable event, including death, arises.
For trusts, the consequence is that excluded property status became a moving target. For chargeable events on or after 6 April 2025, foreign settled property is excluded property if the settlor was not a long-term UK resident at the date of the event — or, where the settlor has died, immediately before death. It is no longer determined once and for all by the settlor's domicile when the assets were settled.
Two charges follow from that:
- A ten-year anniversary charge arises on any anniversary falling while the settlor is a long-term UK resident, at up to 6% and proportionately reduced;
- A proportionate exit charge arises when the settlor ceases to be a long-term UK resident, because at that point the foreign settled property stops being relevant property.
The tail when you leave
Becoming non-resident does not end the exposure immediately. A long-term UK resident who leaves stays within the inheritance tax net for a minimum of 3 years and a maximum of 10, on a scale set by how long they were here: 13 years of UK residence or fewer gives a 3-year tail, 14 years gives 4, and so on up to 20 years of residence giving the full 10.
Anyone planning a departure needs that scale in front of them, because it is the difference between a short wait and a decade.
Transitional protection for older settlements
Property comprised in a settlement immediately before 30 October 2024 keeps two protections. It is not subject to the gift with reservation of benefit rules, and where it sits in a qualifying interest in possession settlement it is not charged when that interest ends or on the death of the beneficiary.
There is also a cap. Proportionate and ten-year anniversary charges on that specified excluded property are limited so that maximum charges in a relevant period are £5 million. The first relevant period runs from 6 April 2025 to the next ten-year anniversary, pro-rated at £125,000 per whole successive quarter; the cap resets each subsequent ten-year period, and tax already paid reduces what remains.
Pre-April-2025 pools and the TRF
Matching of pre-6 April 2025 foreign income and gains to trust distributions continues, but UK resident non-domiciled individuals are no longer entitled to the remittance basis on worldwide trust distributions. Those historic pools are dealt with through the temporary repatriation facility: 12% for 2025/26 and 2026/27, 15% for 2027/28, closing on 5 April 2028.
Be careful with older commentary here. The October 2024 technical note said existing IHT treatment would continue for non-UK property settled before 6 April 2025, and described the TRF as a two-year facility at 12%. Both statements were superseded by what was actually enacted. Several HMRC manual pages are also stale — CG38435 still lists a domicile condition for the section 86 settlor charge that no longer exists.
What trustees and settlors should do
Establish the settlor's residence history properly, because the 10-out-of-20 test now drives the inheritance tax answer and the sliding tail drives what happens on departure. Identify what was in the settlement immediately before 30 October 2024, since that is the boundary for the transitional protections and the £5m cap. Separate pre- and post-April-2025 pools before they become impossible to distinguish. And re-run the purpose of the structure: a trust established for reasons that no longer apply is a cost without a benefit, and winding it up is a decision with its own tax consequences worth modelling deliberately.
Acumon advises trustees, settlors and beneficiaries through trust tax, non-dom tax and inheritance tax planning work, alongside international tax — see also our guides to the remittance basis and estate planning trusts. If a ten-year anniversary falls in the next two years, the settlor's residence position on that date is the number to establish now.