Trusts are among the most flexible tools in international estate and wealth planning — but their tax treatment is sensitive to the residence status of both trustees and beneficiaries. When an individual or family moves abroad, or when a trust was established in one jurisdiction and its trustees or beneficiaries spread internationally, the tax consequences can change materially.
This guide explains how the UK determines whether a trust is UK-resident or non-resident for tax purposes, what each status means in practice, and the most common structures used in international planning for HNW families.
Determining a Trust's UK Residence
A trust's residence for UK tax purposes is determined by the residence of its trustees, not the residence of the settlor or beneficiaries.
UK-resident trust: A majority of trustees are UK tax-resident. The trust is taxed on worldwide income and (for CGT purposes) gains, in much the same way as a UK-resident individual — though at trustee rates (income at 45%, CGT at 24% for most assets).
Non-resident trust: A majority of trustees are non-UK tax-resident. The trust has limited UK tax obligations on its non-UK income and gains.
Tie-breaker: Where trustees are equally split between UK and non-UK residents, the trust's residence follows the residence or domicile of the sole or last UK-resident settlor at the time the settlement was made.
Corporate trustees: A corporate trustee is UK-resident if it is incorporated in the UK, or if its central management and control is exercised in the UK. Many professional trust companies use offshore-incorporated trust companies specifically to achieve non-UK residence for the trust.
UK-Resident Trusts: The Tax Position
A UK-resident discretionary trust is taxable on its worldwide income and gains. Key points:
Income tax: Trustees pay income tax at 45% on income arising in the trust (the "trust rate"). The £1,000 standard rate band that previously taxed the first slice of income at the basic or dividend rate was abolished from 6 April 2024; a trust now has only a £500 de minimis amount (proportionately reduced where a settlor has multiple trusts) below which trust income is not taxed or reported, with all income above that taxed at trust rates. The 45% rate applies to both non-savings income and savings income; dividends are taxed at 39.35% within the trust.
CGT: Trustees of a UK-resident trust are subject to CGT at 24% (residential property) or 24% (other assets from 2024) on gains. The trust's annual exempt amount is one half of the individual annual exempt amount — currently £1,500 for 2026/27.
Ten-year anniversary and exit charges: Discretionary trusts within the relevant property regime (most non-charitable trusts) pay a periodic charge of up to 6% of the trust's value every ten years, and a proportionate exit charge when capital is distributed to beneficiaries. These charges apply regardless of whether the trust holds UK or non-UK assets, provided the trust is UK-resident and the assets are not excluded property.
Non-Resident Trusts: UK Tax Obligations
A non-resident trust does not pay UK tax on its worldwide income and gains — but it is not entirely free of UK tax obligations.
UK-source income: If the non-resident trust holds UK assets that generate income — UK rental income, UK bank interest — that income may be subject to UK income tax at source, or the trust may be required to file UK tax returns and pay UK tax on UK-source income.
UK-situs asset disposals: A non-resident trust that disposes of UK residential property must comply with the non-resident CGT rules (report within 60 days). From April 2019, UK commercial property and shares in UK property-rich companies are also within the NRCGT net.
Attribution rules — settlor charge: Where a UK-resident individual establishes a non-resident trust and the trust is "settlor-interested" (the settlor or their spouse can benefit), all income and gains arising in the non-resident trust are attributed to the settlor and taxed as their own, regardless of whether those funds are distributed. This is a powerful anti-avoidance provision. The effect is that a UK-resident settlor cannot shelter income from UK tax by using a non-resident trust where they retain a potential benefit.
Attribution rules — beneficiary charge: Where a non-resident trust makes distributions to UK-resident beneficiaries, those distributions can be attributed to historic income or gains of the trust and taxed in the hands of the beneficiary accordingly. This is the "transfer of assets abroad" legislation.
Migrating a Trust From UK to Non-Resident Status
Changing the majority of trustees from UK-resident to non-UK-resident causes the trust to migrate from UK residency to non-residency. This is a significant step with material tax consequences.
On migration, there is a deemed disposal of the trust's assets at market value — as if all assets had been sold and immediately reacquired. Any unrealised gains at the point of migration are subject to UK CGT. This "exit charge" can be substantial if the trust holds assets with significant built-in gains.
Trust migrations should be planned carefully, with professional advice on: the CGT cost of migration; whether any reliefs or holdover reliefs are available; the impact on the trust's ongoing tax position; and whether migration actually achieves the desired outcome given the settlor and beneficiary positions.
Excluded Property Trusts
An Excluded Property Trust (EPT) is a discretionary trust established by a non-UK domiciled settlor, holding non-UK situs assets. The assets within the EPT are "excluded property" for UK IHT purposes — they are outside the relevant property regime's ten-year and exit charges, and they are not in the settlor's estate on death.
The key advantage of an EPT is that it "locks in" excluded property status. If the settlor subsequently becomes UK-domiciled (or, under the post-April 2025 reforms, becomes a Long-Term Resident), the assets already in the EPT retain their excluded property status — as long as they continue to be non-UK situs assets.
Post-April 2025, there are restrictions on new contributions to EPTs by settlors who have become Long-Term Residents. New contributions from an LTR settlor may not qualify as excluded property. The existing assets in the EPT are unaffected. This distinction — between existing assets (protected) and new contributions (potentially taxable) — makes the timing and structure of EPT contributions critical.
The Offshore Bond Inside a Trust
One of the most commonly used structures for internationally mobile HNW families is an offshore investment bond written under a discretionary trust. This combines the tax-deferred growth characteristics of the offshore bond with the succession planning and distribution flexibility of the discretionary trust.
How it works: The settlor contributes capital to a discretionary trust. The trustees invest the capital in an offshore bond (a life assurance policy written on an investment basis, typically issued in the Channel Islands, Dublin, or Luxembourg). The bond accumulates investment returns without annual tax — effectively tax-deferred growth inside the trust. When the trustees surrender the bond or make partial withdrawals (including using the 5% annual allowance), the income or gain is assessed at that point. If the trust is non-UK resident and the beneficiary is non-UK resident at the time of distribution, UK tax may not arise.
The appointment mechanism: Trustees can appoint capital from the trust to a beneficiary who is non-UK resident or in a low-tax bracket, with the surrender of the bond timed to coincide with that beneficiary's non-residence period. This is a legitimate and widely used international planning technique.
Compliance: The trust must be registered with HMRC's Trust Registration Service (TRS). Distributions from the trust are reported to HMRC. The offshore bond itself must comply with the life assurance company's regulatory requirements in its jurisdiction of issue.
Trust Registration Service Requirements
Under the Trust Registration Service (TRS), the following must register:
- All express trusts that are UK tax-resident, regardless of tax liability
- Non-resident trusts that have UK tax consequences (UK-resident trustees; UK assets; UK-source income)
- Certain non-taxable trusts where the trust is not already registered
Registration requires details of the settlor, trustees, and beneficiaries (or classes of beneficiary). This information is not publicly available on the TRS register — it is accessible only to HMRC and specified anti-money laundering bodies.
Failure to register attracts penalties: fixed penalties for late registration and potentially higher penalties for deliberate failure.
How Global Investments Can Help
Trust structures involving international settlors, trustees, and beneficiaries require careful ongoing management and specialist tax advice. Getting the residence position right, managing distributions to minimise tax, complying with the TRS and other reporting obligations, and ensuring that excluded property status is preserved where applicable all require professional oversight. Global Investments works with internationally mobile families to coordinate the trust, investment, and tax aspects of their structures. Please speak with one of our advisers to review your trust position.
Frequently Asked Questions
Is a trust UK-resident or non-resident for tax purposes?
A trust is UK tax-resident if the majority of its trustees are UK-resident. It is non-resident if the majority are not. In cases where there is an equal split, the trust is resident where the sole or last UK-resident settlor was resident or domiciled at the time of settlement.
Can a trust become non-resident simply by changing the trustees?
Yes, but this triggers an exit charge under the relevant property regime. When a UK-resident discretionary trust migrates to non-residence by replacing UK trustees with non-UK trustees, there is a deemed disposal of trust assets and a tax charge may arise. Migrations should always be planned carefully with specialist advice.
What is an excluded property trust and who can benefit from one?
An excluded property trust is a discretionary trust established by a non-UK domiciled settlor holding non-UK situs assets. The assets in the trust are excluded property and are not subject to UK IHT — even if the settlor later becomes UK-domiciled. Post-April 2025, new contributions by settlors who are Long-Term Residents may not qualify as excluded property.
Do non-resident trusts still pay UK tax?
A non-resident trust may still have UK tax obligations. UK-source income (UK rental income, UK interest) arising within a non-resident trust may be subject to UK income tax. UK-situs assets disposed of by the trust may be subject to UK CGT. And where the settlor is UK-resident and the trust is settlor-interested, the trust's income and gains can be attributed back to the settlor.
Does a non-UK trust need to register with HMRC?
Non-UK trusts that have UK tax consequences — including owning UK assets, having UK-resident trustees, or receiving UK-source income — are generally required to register with HMRC's Trust Registration Service (TRS). There are penalties for failure to register. All UK-resident trusts (express trusts) must register regardless of whether they have a UK tax liability.
This guide is for general information only and does not constitute financial advice or a personal recommendation. The value of investments can fall as well as rise and you may get back less than you invest. Tax rules, pension legislation, and investment regulations change — always verify current rules and seek advice from a qualified independent financial adviser before making any financial decisions.