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)
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) | 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) | 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.