Excluded Property Trusts for Non-UK Domiciliaries: What You Need to Know

Excluded property trusts (EPTs) have been one of the primary tools available to non-UK domiciliaries for protecting non-UK assets from UK inheritance tax. They operate — or operated, in their pre-reform form — by placing non-UK assets into a trust at a time when the settlor was non-UK domiciled, so that those assets became "excluded property" for IHT purposes. The structure then preserved that IHT treatment even after the settlor became UK domiciled or deemed UK domiciled.

This area was significantly affected by the UK government's reforms to the non-dom and IHT regime, announced in 2024 and enacted in 2025. This guide provides an overview of the principles involved and the impact of the reforms, but it is essential to take current professional advice before taking any action — the rules as of 2026 are materially different from those that applied before the reforms, and guidance from earlier years should not be relied upon.

The Pre-Reform Regime: Background

To understand the post-reform position, it helps to understand what EPTs were designed to do under the old regime.

Under the regime that applied before the 2025 reforms:

• An individual who was non-UK domiciled paid UK IHT only on UK-situated assets (not their worldwide estate).
• An individual became deemed UK domiciled for IHT after being UK resident for 15 of the preceding 20 years — at which point their worldwide estate became subject to UK IHT.
• An excluded property trust, established before the settlor became deemed domiciled, could hold non-UK assets as "excluded property" — meaning those assets were outside the scope of UK IHT even after the settlor became deemed domiciled.
• The window to establish the trust was therefore the period before the 15-year deemed domicile threshold was reached.

For non-doms approaching deemed domicile, this was a valuable planning opportunity — essentially "locking in" non-UK assets outside the IHT net permanently, regardless of future changes in domicile status.

The 2025 Non-Dom Reforms: What Changed

The Labour government's 2025 Finance Act fundamentally reformed the non-dom regime. The key changes included:

• Abolition of the remittance basis of taxation for UK residents.
• Replacement with a residence-based system for income and capital gains tax — new arrivals to the UK benefit from a 4-year Foreign Income and Gains (FIG) regime, broadly exempting qualifying foreign income and gains for their first four years of UK tax residence (for those UK resident after a period of at least 10 consecutive non-resident years).
• Changes to the IHT regime: the previous domicile-based approach to IHT was replaced with a system based on long-term UK residence — broadly, an individual who has been UK resident for at least 10 of the previous 20 tax years is within the scope of UK IHT on their worldwide estate. The precise rules are complex and were subject to further technical changes into 2025.
• Excluded property trusts: existing EPTs were not abolished, but the rules governing their continued IHT protection and the circumstances in which new EPTs could be effective were modified.

As of mid-2026, the current rules require careful analysis of:

• When existing EPTs were established relative to the settlor's residence history.
• Whether the structure of the trust and its assets meets the requirements for excluded property treatment under the post-reform rules.
• Whether new EPTs established now would provide the intended protection under the new regime.

This guide does not attempt to state the current rules definitively — the regime changed significantly in 2025, technical guidance was still being issued in 2025–26, and the rules are highly individual. Professional advice from a specialist in UK international tax is essential before taking any action.

Principles of Trust Structuring for Non-Doms

Notwithstanding the reforms, the underlying principles of trust planning for non-UK domiciliaries remain relevant:

Offshore discretionary trust

The typical EPT is an offshore discretionary trust, established in a jurisdiction with a mature trust law tradition and no local trust taxation — Jersey, Guernsey, Isle of Man, Cayman Islands, British Virgin Islands, and Bermuda are common choices. Cyprus, as an EU trust law jurisdiction, is also used.

A discretionary trust gives the trustees discretion over how the assets are applied for the benefit of the beneficiaries (who typically include the settlor's family and, in some cases, the settlor themselves). The trustees hold legal ownership; the beneficiaries have an interest that does not constitute legal ownership of the underlying assets.

Letter of wishes

The settlor typically provides a letter of wishes to the trustees — a non-binding but practically influential document setting out how they would like the trust administered, which beneficiaries to favour, and in what circumstances. Because the trustees have legal discretion, the letter is not legally binding, but professional trustees generally follow it absent compelling reasons not to.

Asset siting

EPTs typically hold non-UK assets — international investment portfolios, non-UK property, offshore bonds, and similar. Holding UK assets in the trust generally does not achieve IHT benefits, as UK-sited assets are within the scope of UK IHT regardless of the trust structure.

Who Should Consider an Excluded Property Trust?

Even under the reformed rules, trust planning for non-UK domiciliaries with significant non-UK assets remains an important area to consider. An EPT may be worth exploring if:

• You are non-UK domiciled by origin and have significant non-UK assets that you wish to shelter from UK IHT.
• You are a long-term UK resident who has not yet reached the relevant threshold under the new residence-based IHT regime.
• You are considering relocating to the UK and wish to plan your estate before becoming subject to the UK IHT regime.

Whether an EPT is appropriate in your specific circumstances depends on your current domicile, residence history, the nature and value of your assets, your family situation, and the post-reform rules as they apply to you. This is not a decision to take without specialist advice.

Interaction with Other Planning Tools

EPTs do not exist in isolation. They interact with:

• UK wills: a trust holding non-UK assets means those assets are not distributed under your UK will (they are distributed according to the trust deed and letter of wishes).
• IHT annual exemptions and potentially exempt transfers: these apply to lifetime transfers into trust and may affect the setup costs.
• Relevant property charges: UK discretionary trusts are potentially subject to 10-yearly anniversary charges and exit charges. The extent to which an EPT is subject to these depends on whether the trust assets qualify as excluded property under the current rules.
• Income and capital gains tax: trust income and gains may be subject to UK tax depending on the residence of the trustees and beneficiaries. Offshore trustees can hold assets on a gross roll-up basis, but UK beneficiaries receiving distributions may be subject to UK tax on their share of trust income and gains.

The Importance of Current Professional Advice

This area requires specialist, up-to-date professional advice from a UK-qualified tax lawyer or accountant with expertise in international trust and IHT planning. The 2025 reforms were significant and the transition provisions and technical details are complex. Any planning undertaken before the reforms was based on a different legal framework; existing EPT holders should review their structures with their advisers to confirm continued effectiveness.

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The information in this guide is for general educational purposes only. It does not constitute financial, tax, or legal advice. The UK non-dom and IHT regime changed significantly in 2025. Rules are complex, change over time, and depend heavily on individual circumstances. You must seek independent professional advice from a qualified specialist before taking any action in connection with trust planning or excluded property trusts.

How Global Investments Can Help

Global Investments works with non-UK domiciliaries navigating the post-reform IHT and non-dom landscape. We help clients understand their current position, identify planning opportunities, and work with specialist UK tax counsel and offshore trust professionals to implement appropriate structures. Contact our advisory team to discuss your personal circumstances.