Welcome to Hoxton Wealth, the new home of Hoxton Capital
UK & Non UK Trusts
Hoxton Tax • UK & Non UK Trusts
Inheritance Tax
Trusts play a key role in succession planning, asset protection, and long-term wealth structuring, but their tax treatment is often complex.
Each trust involves a settlor, trustees, and beneficiaries, with the tax position influenced by their respective residence statuses, as well as the nature and location of the underlying assets.
Trusts can give rise to Income Tax and Capital Gains Tax charges—particularly for UK resident trusts or those holding UK assets—as well as Inheritance Tax (IHT) under varying regimes depending on how the trust was settled.
Importantly, UK tax can still apply where a trust has UK resident beneficiaries, even if the trust was not originally established with UK assets or any intended UK connection. This can introduce additional layers of complexity over time.
Alongside this, trustees must navigate a range of reporting requirements, including the Trust Registration Service, Self Assessment filings, and relevant IHT returns.
Careful structuring and ongoing oversight are essential to ensure compliance and to support long-term planning objectives.
How does this impact you?
The residence status of a trust is primarily determined by the residence of the trustees, although the position can be more complex where there is a mixture of UK and non-UK trustees.
Broadly, a trust will generally be treated as UK resident where all trustees are UK resident. A trust can also be treated as UK resident in certain circumstances where there is a UK resident trustee and a UK resident or UK domiciled settlor at the time the trust was created.
This distinction is important because it affects the trust’s exposure to UK Income Tax, Capital Gains Tax, and reporting obligations.
Yes. A non-UK trust can still be subject to UK tax where it holds UK-situated assets.
This may include exposure to Income Tax on UK-source income, Capital Gains Tax on UK property, and potentially Inheritance Tax (IHT). The fact that a trust is non-UK resident does not remove UK tax obligations where there is a UK connection.
Beneficiaries are taxed based on the type of trust and the nature of the distribution.
Income distributions are typically paid net of tax, with trustees providing a form R185 showing the income and associated tax credit.
UK resident beneficiaries may be subject to UK tax on distributions received from a non UK resident trust, depending on the nature of the distribution.
This can include:
- Income distributions, which are typically taxable as income
- Capital distributions, which may be matched to gains within the trust
The rules are complex, where anti-avoidance provisions can bring non UK income and gains into charge.
Trusts are subject to Capital Gains Tax on the disposal of assets.
- UK resident trusts are generally taxable on worldwide gains
- Non-UK trusts are typically only subject to UK CGT on UK assets, such as UK property
- UK Trusts becoming non UK resident, may face ‘exit charges’ which is CGT on gains, up to the point they become non UK resident
The applicable rates and available exemptions differ from those available to individuals.
Gains realised within a non-UK trust are not always taxed immediately in the UK.
However, where there are UK resident beneficiaries, those gains may be taxed when distributions or benefits (‘payments’) are received, under the matching rules.
“Matching” refers to the process by which trust gains are allocated to payments made to beneficiaries and taxed accordingly.
This can result in unexpected tax liabilities, particularly where gains have built up over a number of years.
Income generated within a UK trust is typically taxed at the trust level, often at higher rates than those applicable to individuals.
When income is distributed:
- Beneficiaries may receive it with a tax credit
- Additional tax may be payable depending on their personal tax position
The interaction between trustee-level tax and beneficiary taxation can be complex and requires careful management.
Inheritance Tax can apply to trusts under specific regimes, depending on how and when the trust was established.
Most trusts fall within the “relevant property regime”, which can give rise to:
- Entry charges when assets are settled
- Periodic charges (typically every 10 years)
- Exit charges when assets leave the trust
The exact treatment depends on the structure and timing of the trust.
Relevant property trusts are the most common type and are subject to ongoing IHT charges.
Other trust types (such as Interest In possession Trusts or Trusts for disabled persons) may fall outside this regime and be taxed differently.
Understanding which regime applies is critical, as it directly impacts the timing and amount of IHT payable.
Many trusts are required to register with the UK Trust Registration Service (TRS).
This includes:
- UK resident trusts
- Certain non-UK trusts with UK connections (e.g. UK assets or UK tax liabilities)
Registration is required even in some cases where there is no immediate tax liability.
A trust will generally need to file a Self Assessment tax return where it has:
UK tax liabilities (e.g. income or gains)
- UK source income
- Taxable events such as disposals of assets
Trustees are responsible for ensuring returns are filed and taxes are paid on time.
The UK has extensive anti-avoidance rules that apply to offshore trusts.
These rules are designed to ensure that UK resident individuals cannot avoid UK tax by using non-UK structures, either companies or Trusts. They can result in:
- Income or gains being attributed to UK individuals
- Tax charges arising even where funds are not immediately received
These provisions are complex and require careful planning, particularly where beneficiaries or settlors are UK resident.
Why Hoxton?
Trust planning requires careful coordination between tax, legal, and long-term family objectives.
Trusts can be powerful tools for succession, control, and long-term wealth planning—but only when structured and managed correctly.
At Hoxton Tax, we combine technical expertise with a pragmatic approach, advising settlors, trustees, and beneficiaries on both the tax treatment and ongoing operation of trust structures. Our focus is on delivering advice that is robust in principle and workable in practice.
Where appropriate, we work alongside Hoxton Legal to ensure arrangements are not only technically sound, but properly implemented and maintained over time.
We help clients:
Trust structuring and establishment – Advising on the appropriate use of UK and non-UK trusts, ensuring alignment with succession, control, and long-term planning objectives.
Residence and tax status analysis – Determining the residence position of trusts and relevant parties, and the resulting UK tax exposure.
Trust income and CGT planning – Advising on the taxation of income and gains within trust structures, including distributions to beneficiaries.
Inheritance Tax planning for trusts – Reviewing entry, periodic, and exit charges, and ensuring efficient structuring under the relevant IHT regime, as well as reporting.
Trust changes from April 2025 (LTR framework) – Advising on the impact of the Long-Term Residence (LTR) regime, including changes to exposure, interaction with existing structures, and the application of the relevant property regime.
Beneficiary tax planning – Supporting UK resident beneficiaries in understanding and managing tax on distributions, including complex matching rules.
Offshore trust advice – Navigating anti-avoidance rules and cross-border considerations for non-UK trust structures.
Trust compliance and reporting – Managing obligations including Trust Registration Service (TRS), Self Assessment returns, and relevant IHT filings.
Ongoing trust reviews – Monitoring structures over time to reflect changes in residence, legislation, and family circumstances.
Case Study: Managing IHT Exposure Across Different LTR Positions
A non-UK resident trust was established many years ago with no UK assets and no initial UK connection. Over time, members of the family became UK resident beneficiaries, and from 6 April 2025, the settlor was considered Long-Term Resident (LTR).
This created a number of UK tax considerations, including potential exposure under the relevant property regime for Inheritance Tax (IHT).
We worked with the family to:
- Review the trust structure and historic activity, including gains realised over time
- Assess the impact of the settlor’s LTR status, particularly in relation to the trust’s ongoing IHT position
- Analyse whether the trust had entered the relevant property regime, including potential periodic and exit charges
- Model the IHT exposure, comparing the ongoing position of retaining the trust versus winding up the structure
- Review the position of UK resident beneficiaries, including how distributions would be taxed under the matching rules
- Ensure appropriate reporting and compliance, including UK filing requirements
The result was a clear understanding of both income, CGT, and IHT exposure, enabling the family to make an informed decision on whether to retain or unwind the trust, aligned to their long-term objectives.
How Can We Help You?
If you would like to speak to one of our advisers, please get in touch today.
Contact Hoxton Wealth
We are available to discuss how Hoxton Wealth can help you achieve your financial goals. Together, we can help you build a brighter financial future.
