UK trusts post-non-dom: residence and settlor-interested rules

The fundamental shift

Under the non-dom regime, an offshore trust "settled" before acquiring UK domicile remained as an excluded property trust: its non-UK assets were outside IHT, indefinitely. Since April 2025 this logic changes.

The new rules

• The test is no longer domicile but Long-Term Resident (10/20 years).
• Trusts settled by a person becoming LTR may fall within the Relevant Property Regime (10-year 6% charges).
• Settlor-interested trusts trigger POAT (Pre-Owned Asset Tax) if the settlor or already-UK-resident beneficiaries receive benefit.

Pre-existing trusts: what happens?

Offshore trust settled before 6-Apr-2025

• Remains excluded property while the settlor is NOT LTR.
• If settlor becomes LTR: non-UK trust assets fall within the Relevant Property Regime going forward.
• Settlement date remains relevant for the next "ten-year charge".

Trust with UK-resident beneficiaries

• Capital distributions taxed to beneficiary at 10/20% CGT.
• Income distributions at 45% marginal.
• TRF available only for pre-2025 income/gains.

Recommendations

1. Review "settled" status: settlement date determines vested rights.
2. Decant into sub-trusts segregated by beneficiary jurisdiction.
3. Consider irrevocable exclusion of settlor to avoid settlor-interested rules.
4. Distribute pre-2025 capital during the TRF window leveraging the 12% rate.