From 6 April 2025, the UK fundamentally reformed its approach to Inheritance Tax (“IHT”), replacing the long‑standing domicile‑based regime with a residence‑based system. These changes have far‑reaching implications for many non‑UK resident trusts and the trustees who administer them.
For the first time, a wide range of offshore trusts that were historically outside the UK IHT net may now fall squarely within the relevant property regime, bringing with them periodic charges, exit charges and onerous reporting obligations.
This alert summarises the key changes, explains what trustees now need to consider, and outlines how we can support you through this transition.
Move from domicile to residence
UK IHT is now based on an individual’s UK residence status, not domicile.
An individual will become subject to UK IHT on their worldwide assets once they are classed as a UK long‑term resident, broadly defined as being resident in the UK for 10 out of the previous 20 tax years.
Once this threshold is met, exposure to IHT can continue for a period after the individual leaves the UK, meaning trustees must consider historic, current and future residence positions of settlors and beneficiaries.
Impact on trusts – expanded scope of the relevant property regime
The reforms significantly broaden the circumstances in which non‑UK trusts are subject to UK IHT.
In particular:
- Trusts with a UK long‑term resident settlor may now be treated as relevant property trusts, even where the trust was established offshore and holds only non‑UK assets.
- Trusts that were previously “protected” from IHT may now face ten‑year anniversary charges and exit charges.
- The IHT position must now be considered regularly, reflecting changes in settlor residence over time.
- This creates new exposure not only to IHT, but also to ongoing administration and compliance burdens.
Trustee reporting and compliance obligations
Where a trust falls within the UK IHT regime, trustees face significantly increased obligations, including:
IHT reporting
- Ten‑year anniversary returns (IHT100 and relevant schedules)
- Exit charge reporting following capital appointments. In order to quantify this, one would need to prepare the relevant income and stockpiled gain schedules as any amounts matched to income would not attract an IHT exit charge.
- Ongoing valuation requirements for trust assets
Increased monitoring requirements
Trustees will need to:
- Track settlor UK residence status
- Monitor when the settlor becomes (or ceases to be) a UK long‑term resident
- Maintain a forward diary of ten‑year anniversaries and potential chargeable events
Penalty exposure
The post‑April 2025 regime is accompanied by stringent filing deadlines and penalties for late or incorrect IHT reporting, increasing trustee exposure if obligations are missed.
What this means for you as a non‑resident Trustee
These changes present material compliance risk, but also an opportunity for early planning and orderly decision‑making.
Time to review
- Whether any trusts you administer are now within the relevant property regime.
- The current and historic UK residence status of settlors.
- Future IHT exposure at upcoming ten‑year anniversaries.
- Trust distribution and investment strategies in light of the new rules.
- Updating relevant income and stockpiled gain schedules.
- Whether continuing to operate certain structures remains cost‑effective.
- In many cases, doing nothing is no longer a viable option.
In addition to the above changes thought should be given to any previous reliance on business and or agricultural property relief as these very valuable reliefs have significantly changed from the 6 April 2026 and may also impact a structure’s overall exposure to UK IHT and liability to tax.
Our role and how we can help
The post‑6 April 2025 IHT landscape is complex and evolving. We regularly support non‑resident trustees navigating these changes and can assist as much or as little as required.
Our standard services include
- Reviewing whether a trust now falls within the UK IHT relevant property regime.
- Assessing settlor residence history and future exposure.
- Preparing and filing IHT100 returns, including ten‑year and exit charges.
- Calculating and reviewing IHT liabilities.
- Updating relevant income and stockpiled gain schedules.
- Providing clear, practical written advice tailored to trustees and beneficiaries.
- Bespoke support for Trustees and Corporate Service Providers.
We also provide project‑based and portfolio‑wide support, including:
- Mapping affected trusts across your book of business.
- Preparing trustee‑friendly summaries for onward communication to clients.
- Building IHT compliance diaries for future reporting obligations.
- Assisting with trust restructurings or wind‑ups where appropriate.
- Delivering training sessions for trustee and administration teams.
- Provision of checklists to be included as part of your distribution pack.
Next steps
With the IHT reforms now in force, we recommend undertaking an IHT review for any trust connected to UK‑resident individuals to ensure risks are identified early and compliance obligations are properly managed. We are here to help you navigate these changes.
Please get in touch if you would like to discuss any of the above or require tailored support.
