Changes to taxation of trusts settled by non-doms – Spring Budget 2024

As part of the 2024 Spring Budget and changes announced to the tax treatment of non-UK domiciled individuals, the initial details set out changes that will be made to trusts that have or will be settled before an individual is considered UK domiciled. 

Trust income/gains and distributions

From 6 April 2025, the protection from tax on income and gains arising within settlor-interested trusts will no longer be available to individuals who do not qualify for the new 4-year FIG regime. 

It appears as though the application of the ‘Transfer of Assets Abroad’ anti-avoidance provisions will apply to the settlor on the same basis as UK domiciled settlors. 

Currently, under anti-avoidance provisions, many non-UK trusts are required to apply the ‘matching rules’ to capital distributions made to UK resident beneficiaries. These rules will continue to apply to income and gains realised prior to 6 April 2025, however relevant individuals will no longer be able to claim the remittance basis to protect those distributions from tax. 

IHT protections for relevant trusts

Under current rules, typically non-UK located assets settled by a non-UK domiciled settlor are outside the scope of the IHT regime. It has been confirmed that this treatment for settlements made prior to 6 April 2025 will not change where the assets in the settlement continue to meet the requirements to be excluded property under current legislation. It has also been confirmed that the interaction between the Gift with Reservation of Benefit (GWRB) provisions and excluded property trust rules also remain. 

For current non-UK domiciled individuals, they may still find benefit in settling non-UK located assets into trust before 6 April 2025 to mitigate the risk of IHT charges, however, they may not benefit from the income tax and capital gains tax benefits previously afforded. 

Watch our Spring Budget question time webinar

Following the Spring Budget, our panel of specialists examined the announcements made by The Chancellor, discussing what these changes mean for you. They also answered questions from our live audience. This webinar is now available to watch on demand here.

Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.