Curiously, very few expat clients have trusts. There are good reasons for this — but those reasons have changed significantly since April 2025.

Why expats have historically avoided trusts

The difficulty has always been inheritance tax. Transferring significant assets into a trust typically triggers a 20% IHT charge at entry (effectively 25% if you pay the tax yourself rather than from the trust). Add the 6% decennial charge, exit charges on distributions, and the risk of a reservation of benefit bringing everything back into your estate on death — and the numbers rarely stack up.

The one route around this was non-UK domicile. If you were neither UK domiciled nor deemed UK domiciled, gifts of non-UK assets into trust were outside IHT entirely. The problem was that domicile is inherently uncertain. Many expats who had lived abroad for decades still had a UK domicile of origin, and the question of whether they had acquired a domicile of choice elsewhere was one that two experienced advisers could legitimately answer differently. That uncertainty, combined with a potential 25% upfront tax charge, made trust planning unattractive for most.

What has changed from April 2025

From 6 April 2025, the UK no longer uses domicile as the basis for IHT exposure. Instead, the test is whether you are a "long-term UK resident" (LTUR) — meaning you have been UK resident in at least 10 of the previous 20 tax years.

If you are not a LTUR — broadly, if you have been non-UK resident for more than 10 years — gifts of non-UK assets into trust are outside the scope of IHT, without the need to prove domicile. That means:

  • No IHT on the gift into trust
  • No 6% decennial charge
  • No exit charges on distributions
  • No reservation of benefit

And critically, you now have certainty. Rather than relying on a subjective assessment of domicile intent, you can simply count your years of UK residence. If you have been out of the UK for more than 10 years, the position is clear.

Should you set up a trust now?

Not necessarily. There are other considerations: the tax rules in your country of residence, the tax position of any UK-resident beneficiaries, the cost and complexity of running a trust, and whether there is a genuine purpose — asset protection, succession planning, avoiding probate — that makes the structure worthwhile.

But for many expats who previously felt they could not engage in trust planning because of the domicile uncertainty, the new rules represent a genuine change. If you have been outside the UK for more than a decade and are considering your estate planning options, now is a good time to take advice.

Please feel free to contact a member of the team to discuss your circumstances.