The End of Trust Protections
The reforms also have major implications for non-UK resident trusts, particularly those that were settled by non-domiciled or deemed domiciled individuals.
From April 2025, the existing protections that prevent UK taxation of foreign income and gains accruing within settlor-interested offshore trusts will be removed. In practice, this means that all income and gains arising within such trusts will be fully taxable on the settlor, unless the settlor qualifies for and claims the new 4-year FIG regime.
This change could have profound effects on the tax treatment of long-standing trust structures, particularly those used for wealth preservation, succession planning, and asset protection. Many trusts that were historically excluded from the UK tax net will now face annual tax liabilities, potentially eroding the value of the trust fund and its long-term viability.
Inheritance Tax Reform on the Horizon
While the headline changes from April 2025 relate to income tax and capital gains tax, the government has also signalled its intention to reform the Inheritance Tax (IHT) rules in due course, with further consultation expected.
The plan is to move to a residence-based IHT regime, bringing the UK in line with many other jurisdictions. Under this approach, an individual would become subject to UK IHT on their worldwide assets once they have been UK tax resident for at least ten years.
Moreover, there are proposals for a “ten-year tail” provision, which would continue to subject individuals to UK IHT even after they leave the UK, for a further ten years. This will represent a considerable extension of the IHT net and may have far-reaching implications for internationally mobile individuals and those considering leaving the UK in the near future.
Overseas Workday Relief to Continue
One piece of good news for mobile executives and internationally assigned employees is that Overseas Workday Relief (OWR) will continue under the new system. Indeed, the government has pledged to simplify the rules surrounding this relief, making it easier to apply and administer.
Going forward, OWR will be available to employees who qualify for the new 4-year FIG regime and will offer a tax exemption for earnings relating to duties performed outside the UK during the first three tax years of UK residence. This will continue to be an important planning tool for employers and employees managing cross-border assignments.
What You Should Do Now
The changes outlined above represent a radical departure from the UK’s historic treatment of non-domiciled individuals and offshore trusts. For those who have benefited from the remittance basis or offshore trust structures, the new regime will require a complete re-evaluation of personal and family wealth strategies.
Given the scale and complexity of these reforms, we recommend that affected individuals take urgent action to review their current position and begin planning for the transition. Key steps may include:
- Reviewing your UK residence history and forward planning to determine eligibility for the 4-year FIG regime;
- Assessing offshore income, gains, and trust structures to understand how the new rules will apply;
- Considering asset sales or repatriation opportunities to take advantage of transitional reliefs;
- Evaluating the long-term impact of potential IHT exposure under the forthcoming residence-based regime.
How We Can Help
At Fusion Consulting Group, we specialise in advising internationally mobile individuals, family offices, and trustees on all aspects of UK tax planning.
Our experienced team of tax and legal professionals can help you navigate the transition, take advantage of available reliefs, and restructure your affairs for long-term efficiency.
Whether you are arriving in the UK, planning your exit, or simply reassessing your current position, we’re here to help you build a strategy that is robust, compliant, and future-proof.
To discuss how these changes may affect you or your clients, get in touch with us today for a confidential consultation.
