Changes Impacting Trusts, Entities & Offshore Setups
Removal of Trust Protections & Old Rules
From 6 April 2025, protections for settlor-interested trusts are largely removed for non-UK domiciled and deemed domiciled individuals who are not eligible for the FIG regime (gov.uk). Foreign income and gains arising in trusts will generally be taxed in the UK as it arises under the arising basis. |
The remittance basis is abolished, so income retained offshore that was not brought home before 2025 may face new tax liabilities, unless TRF relief is used. |
Entity Examples & Case Insights
- Example 1: An individual with a trust settled before 6 April 2025 seeing overseas income beyond UK taxed earlier, but the trust was previously excluded. Post-2025, unless within FIG regime, income is taxable as it arises. |
- Example 2: A company abroad with income paid to a UK resident settlor or settlor-interested trust – from 2025-26 onward, all income (UK & foreign) is assessed, not just if remitted or under certain domicile conditions. |
Practical Setup & Planning Tips
- Review all trusts and offshore entities before April 2025 to see if any rebasing or restructuring is possible. |
- Consider whether FIG regime eligibility will apply. If yes, entity income exposure could be lower. |
- Use TRF where beneficial: bring unremitted foreign income/gains at reduced tax for limited years. |
Compliance & Reporting Considerations
- Keep clear documentation of income, remittances, trusts assets and past non-UK residence periods. |
- Monitor upcoming draft legislation and guidance from HMRC on inheritance tax (IHT) residence-based design. |
- Seek professional advice early to align entity structure with the new rules.
These changes reset long-standing planning around offshore shelters and domicilerelated tax treatment of entities. Entities and trusts need urgent review.