Entity Setup
How Entity Setup Affects Foreign & Trust Income for Entrepreneurs
Selecting the right entity structure now can make a significant difference under the new UK tax regime for non-domiciled, resident individuals and trusts.
By NomadicTax Research Team • 5-8 min read • March 9, 2026
## The New Entity Landscape in UK Tax
Under the reforms that came into force 6 April 2025, the UK abolished the remittance basis and the old non-dom system. Residency—not domicile—now determines how foreign income and gains are taxed. Trusts where settlors retain interest are more exposed under these rules. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4705?utm_source=openai))
Structuring decisions—such as using trusts, companies, or partnerships—have new implications for tax rates, timing, and reporting. Choosing the wrong structure can lead to unnecessary tax liabilities or complexity.
## Comparing Structures
| Entity Type | Foreign Income/Gain Treatment | Reporting Complexity | Use Case |
|---|---|---|---|
| **Trusts with settlor interest** | Income taxed as it arises; no protection, regardless of setup date. FIG regime may help for 4 years. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4705?utm_source=openai))|High (needs to track trust income, distributions, matching rules)|Use with caution if beneficiaries or settlor receive benefits. May still be appropriate for long-term estate planning.|
| **Companies (UK resident)** | Foreign income and gains taxed like domestic ones; any distributions/dividends separate. |Moderate– high depending on foreign operations |Used for commercial businesses with international trade; may shield individuals somewhat via corporate distributions.|
| **Partnerships / Joint Ventures** | Profit shares counted individually; some reliefs or exclusion apply depending on circumstances—for example profit share from partner does *not* count toward qualifying income for MTD threshold. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))|Depending on required filings, may be simpler in some respects |Used where multiple owners or flexibility in sharing profits is beneficial.|
## What Entrepreneurs Should Consider Now
- **Trust usage**: If you currently use trusts (especially offshore trusts), examine whether distributions or any benefit flow can be modified to reduce exposure under the new estate/settlements rules.
- **Company vs personal ownership**: If foreign income or gains flow through companies, assess whether retaining income inside corporate entity or paying out dividends is more tax-efficient.
- **Partnerships and profit shares**: Clarify if profit shares from partnerships affect your MTD threshold or foreign income exposure.
- **FIG regime eligibility**: Entities or structures that enable individuals to claim the 4-year FIG relief may save tax; plan few years ahead.
- Seek **specialist advice**—international tax, trusts, estate planning experts will be important.
## Example Scenario
> **Case**: David, an entrepreneur with a portfolio business and property income in multiple countries, owns an offshore trust in which he retains a settlor interest. Under the new rules, trust income is taxed annually. If he restructured so that foreign operational income flows through a UK-resident company rather than trust, and keeping trusts only for non-income functions, he may benefit from lower overall exposure, while simplifying reporting obligations.
## Action Plan for Entrepreneurs
- Review entity structures now—for trusts, companies, partnerships—and map historical foreign income/gains under each.
- Run projections under both new tax regime and previous to see incremental costs.
- Decide where to realign foreign operations or income flows (company dividends vs direct trust benefits).
- Document changes and ensure compliance with matching, benefit, onward gift, and settlor‐interested rules.
- Look ahead to when you may trigger MTD thresholds and adjust record-keeping practice accordingly.