Trusts, Excluded Property & the New IHT Landscape Excluded property trusts are no longer the safe haven they once were. The new residence-based IHT rules could bring offshore trusts into HMRC’s reach. Is your trust still fit for purpose? For years, UK non-domiciliaries relied on a powerful tool: the excluded property trust. By placing overseas assets into such a structure before becoming deemed domiciled, those assets could remain outside the UK inheritance tax (IHT) net indefinitely. That landscape has shifted dramatically. With the move to a residence-based IHT system from April 2025, the protection once afforded by excluded property trusts is under pressure. If a settlor has been UK-resident for 10 of the last 20 years, the trust’s assets may be brought into scope for IHT, even if those assets sit offshore. This is a fundamental change. Families who believed their structures were watertight may now be exposed. The issues are twofold: • Relevant property charges: Trusts can be hit by periodic and exit charges, significantly eroding value. • Settlor residence status: Once a settlor crosses the 10-year threshold, excluded property treatment may no longer apply. What should families do? 1) Review existing trusts. Don’t assume that what worked before 2025 still works now. 2) Consider restructuring. It may be possible to adapt the trust, or use other vehicles, to preserve some protection. 3) Act early. Timing matters: small windows of opportunity may still exist for those approaching the 10-year mark. Trusts remain a vital tool in wealth and succession planning — but their use has become more complex. The risk of doing nothing is that families find themselves facing unexpected 40% tax bills on assets they assumed were sheltered. As the Inheritance Guru, I guide families through these changes, ensuring their trusts remain effective and aligned with the new rules. To find out more or to book a free consultation, visit https://calendly.com/sallytrish/15-minute-consultation
Excluded property trusts are no longer the safe haven they once were. The new residence-based IHT rules could bring offshore trusts into HMRC’s reach. Is your trust still fit for purpose?
For years, UK non-domiciliaries relied on a powerful tool: the excluded property trust. By placing overseas assets into such a structure before becoming deemed domiciled, those assets could remain outside the UK inheritance tax (IHT) net indefinitely.
That landscape has shifted dramatically. With the move to a residence-based IHT system from April 2025, the protection once afforded by excluded property trusts is under pressure. If a settlor has been UK-resident for 10 of the last 20 years, the trust’s assets may be brought into scope for IHT, even if those assets sit offshore. This is a fundamental change. Families who believed their structures were watertight may now be exposed.
The issues are twofold:
• Relevant property charges: Trusts can be hit by periodic and exit charges, significantly eroding value.
• Settlor residence status: Once a settlor crosses the 10-year threshold, excluded property treatment may no longer apply.
What should families do?
1) Review existing trusts. Don’t assume that what worked before 2025 still works now.
2) Consider restructuring. It may be possible to adapt the trust, or use other vehicles, to preserve some protection.
3) Act early. Timing matters: small windows of opportunity may still exist for those approaching the 10-year mark.
Trusts remain a vital tool in wealth and succession planning — but their use has become more complex. The risk of doing nothing is that families find themselves facing unexpected 40% tax bills on assets they assumed were sheltered.
As the Inheritance Guru, I guide families through these changes, ensuring their trusts remain effective and aligned with the new rules.
To find out more or to book a free consultation, visit https://calendly.com/sallytrish/15-minute-consultation