The two protections that disappeared
The 6 April 2025 reforms removed the two pillars that made an offshore trust attractive to a non-domiciled UK resident. First, the income tax and capital gains tax protected settlement regime, which kept foreign income and gains out of a UK-resident settlor's hands until money was actually paid out. Second, the domicile-based excluded property test that kept non-UK trust assets outside inheritance tax. Crucially, the reforms did not repeal the anti-avoidance machinery that attributes trust income and gains to UK residents; they removed the exemptions that used to switch it off. The settlements code, the transfer of assets abroad rules and the settlor charge for gains now bite in far more cases. Our guide on settlor-interested trusts covers the attribution rules in detail.
Income, gains and inheritance tax now
For a UK-resident settlor who is not FIG-eligible, the default is arising-basis taxation whether or not any distribution is made. Where the trust is settlor-interested, income is taxed on the settlor as it arises under section 624 ITTOIA 2005, and the trust's chargeable gains are attributed to the settlor under section 86 TCGA 1992 as they accrue at trust level. The settlor can face a UK tax bill on income and gains they have never personally received. On the IHT side, non-UK settled property is only excluded property while the settlor is not a long-term UK resident, meaning UK resident for at least 10 of the 20 tax years before the chargeable event. Once that threshold is crossed, the trust's foreign assets can fall into the relevant property regime with 10-year anniversary charges of up to 6% and exit charges. There is also an exit tail of between 3 and 10 years after leaving the UK, covered in our guide on residence-based inheritance tax.
The FIG window, the TRF and what to do
Two transitional regimes soften the change. A settlor within the 4-year FIG regime, available to arrivals who were non-UK resident in all of the previous 10 tax years, can still shelter qualifying foreign trust income and gains during that window. And the Temporary Repatriation Facility lets former remittance-basis users designate pre-6 April 2025 foreign income and gains, including certain matched trust payments, and bring them to the UK at 12% for 2025/26 and 2026/27 or 15% for 2027/28. That deadline makes this a live planning window, and families are actively modelling distributions, appointments out, winding up or deliberately retaining their structures. Horizon advises on offshore trust reviews for a fixed fee agreed upfront, with complex work from £750, and a free clarity call is the easiest place to start.