Entity Setup & Trusts Post-Non-Dom Reforms: What Founders Need to Know

The changing landscape for trusts and entity structures⏤post non-dom reforms With the non-dom (domicile-based) regime abolished from 6 April 2025, many trust and entity structures now carry different tax implications. Trusts holding non-UK assets may no longer benefit from “excluded property” status unless settlors aren’t long-term UK residents. Similarly, founders setting up companies or enterprises with foreign ownership should review how foreign income is taxed under the new FIG regime.(gov.uk) ### Trusts & Inheritance Tax (IHT) exposure Key points:<br>• “Long-term UK resident” status for purposes of IHT is based on being resident for at least 10 of the previous 20 tax years, with a “tail” period after leaving the UK.(gov.uk) <br>• Trusts created by non-UK domiciled settlors after 6 April 2025 (or additions thereafter) will fall under residence-based IHT rules, reducing the benefit of offshore structures to avoid UK IHT.(gov.uk) <br>• Assets held in trust must be assessed for whether they remain “excluded property” or now in scope for UK IHT or CGT. Anti-avoidance rules will be strengthened.(assets.publishing.service.gov.uk) ### Considering company and share-holding structures for founders & scale-ups Tax incentives remain vital for startups and scaling businesses. Under Budget 2025:<br>• Annual Investment Allowance stays at £1 million, allowing immediate relief on plant and machinery purchase.(gov.uk) <br>• Enterprise tax incentives have increased eligibility, supporting scale-ups to attract investment.(gov.uk) <br>• Stamp duty reliefs / exemptions apply for new UK listings—helpful if you’re raising capital.(gov.uk)<br>These incentives should inform your entity’s structure, e.g., whether to raise investment through a UK-resident entity or offshore structure, considering both tax and funding implications. ## Practical examples & strategies for entity setup Example 1: The tech founder with overseas investors<br>Sam is setting up a UK-incorporated company, but some seed funding comes from overseas. Under the old non-dom regime, investors may have structured exits or share-transfers offshore. Now, with residence-based FIG and trust reforms, UK CGT and IHT exposure increases. Sam should ensure clear contractual and share-trust arrangements, possibly using UK entities or hybrid structures where appropriate, and get clarity on tax treaties. Example 2: Trust for estate planning<br>Janet, a soon-to-be long-term UK resident, sets up a trust with non-UK assets. Any additions after 6 April 2025 could be subject to IHT unless Janet maintains non-long-term status. Structure so that trust assets and contributions likely preserve excluded property status (if still eligible) or accept liability and plan transitions. ## Setting up smartly post-reform: actionable checklist 1. Review current trusts and asset holding entities, especially those with foreign property or non-UK assets, for IHT and CGT implications. <br>2. Consider UK company incorporation for transparent tax treatment and easier investor appeal. <br>3. Document Trust deeds and contributions made before and after policy change. <br>4. Evaluate whether to benefit from reliefs like Annual Investment Allowance, UK Listing Relief, etc., and ensure entity qualifies. <br>5. Seek professional legal/tax guidance—trust, entity or estate planning in cross‐border situations is complex and subject to consultation and draft legislation. <br>6. Keep abreast of upcoming consultations, especially offshore anti-avoidance legislation and transfer pricing documentation. ## Risk points to avoid * Assuming offshore trust or company means no UK tax exposure any more.<br>* Failing to update deeds, documents, or elections- e.g. OWR election. <br>* Neglecting the CGT rebasing opportunity for assets accrued before April 2025. <br>* Overlooking inheritance rules for heirs or settlors based on residence status. <br>* Using offshore structures without clear documentation—HMRC anti-avoidance could impose penalties.<br><br>Bottom line: Entities and trusts can still be effective under the new tax regime, but only with thoughtful setup, timing and records. Founders, trustees and foreign-account holders must revisit old assumptions and plan for transparency, residency status, and UK tax exposure moving forward.