What Reforms Were Announced
Effective 6 April 2025, new changes replace the remittance-basis regime for non-UK domiciled individuals with a residence-based regime. The key elements:
- New arrivals get 100% relief on foreign income & gains (FIG) for the first four years of UK residency (if not UK resident in prior ten consecutive years). (gov.uk)
- Preferential tax treatment for trusts and overseas interest is removed for those who do not qualify.
- Inheritance Tax (IHT) exposure for non-UK assets now depends on a 10-year UK residency test: individuals resident for 10 prior years, or 10 years after leaving, will be in scope. Excluded Property Trusts cease to shield assets for those not qualifying. (gov.uk)
Considerations for Entities and Tax-Structuring
- Trusts: Overseas property trusts or asset structures that were able to exclude certain property from IHT may now be caught. Trust setups must be reviewed urgently.
- Corporates & LLPs: Entity types may matter for how “settlor-interested” trust rules apply. Non-UK companies with trust arrangements should assess what parts of their structures may be indirectly capturing non-dom exposure.
- Residency planning: Individuals wanting to retain favorable tax treatment may need to limit UK residency or rebase foreign assets before April 2025 (to 5 April 2017) when conditions permit. (gov.uk)
Action-Oriented Insights
- Review your domicile and residence history—whether someone might qualify as a “new arrival” under the 10-year rules.
- If you were using excluded property trusts, get legal advice to restructure or unwind before the new rules bite.
- Foreign assets acquired before 5 April 2017 may be rebased to that date—beneficial for gains tax. But only under specific conditions.
- Consider the impact on inheritance tax strategies: life insurance, wills, and trusts may need to be updated given the narrowed exemptions.
Real-World Example
Suppose Alice is non-UK domiciled and enters UK residency in April 2025. She hasn’t been UK resident in previous ten years. She will:
- Pay UK tax on UK and foreign-source income and gains; but her foreign income/gains are tax-free for four years.
- If she owns foreign property in a trust, it may now be IHT transmissible depending on whether the trust structure qualifies under the new rules.
- Assets held in an excluded property trust will no longer protect everything—some will be brought into IHT scope if residency tests are met.
Key Takeaway
For entities, family offices, trust beneficiaries, and high net worth individuals: structure matters under these new rules. Early planning, transparent documentation, and possible asset repositioning before April 2025 are likely to yield substantial savings or reduce exposure under the reformed non-dom and IHT regime.