The End of the Non Dom Era – An Agile Approach

The abolition of the UK’s non-domiciled (non-dom) tax status and its replacement with a system based on long-term residency, effective from April 6, 2025, introduced significant changes that have directly impacted non-UK resident trusts with connections to the UK.

These reforms alter the taxation landscape for previously non-UK domiciled individuals and the trusts they have established (often a significant time in the past), impacting on income tax, capital gains tax (CGT), and inheritance tax (IHT).

There’s a wealth of expert commentary available online, from specialist tax professionals who are best placed explain the detailed changes. This article focusses on the journey we, as trustees of many affected trusts, have been on since the bombshell dropped in the October 2024 UK budget, leaving only six months in which to consider how our clients might be impacted and what, if any, options were available to restructure existing arrangements or re-align expectations of future net wealth.

So what did we do?

1. We talked with our clients:We pride ourselves on the strong personal relationships we have developed with our clients over the years, taking time to get to know them, their family dynamics, current financial positions and future needs and expectations.We know that many trusts were not formed with tax planning as a primary motive and that trusts remain a very important part of their wealth planning, asset protection and generational transfers of assets.Nevertheless, the changes to the taxation of trusts with long-term UK resident settlors are significant and have required careful explanation and consideration as to whether they have rendered the existing structures unfit or uneconomical for the remaining benefits they still provide.
2. Engaged with Tax Professionals: As a fully independent fiduciary, we collaborate with a wide range of UK tax advisors, helping us and our clients to fully understand the specific impacts on their trusts and to develop tailored strategies to address new tax exposures.
3. Review and Restructuring of Trusts: Whilst some clients voted with their feet and moved away from the UK, others could not or preferred to remain.For these, we worked with their UK advisors to restructure where possible or, where not, to assist them in understanding the financial impacts of the additional taxes they or their trusts are now subject to and the changes these might necessitate to longer-term expectations.
4. Prepared for the new normal: We have enhanced systems and procedures, rolled out training to our admin teams and increased compliance measures to assist with adherence to the new UK tax laws and reporting obligations.
5. Monitored Legislative Developments: We know that nothing remains constant and much of the initial announcements were broad and lacking in the necessary detail for some time. We encourage all of our team to stay abreast of any legislative updates or clarifications to ensure that we remained well placed to understand the evolving landscape.

Is any of the above any more or less than should be expected of any professional trustee?We would hope not!However, where we think we stand out in such times of major upheaval to long-established business models, is in our nimbleness and ability to make decisions quickly.As an owner-managed, truly independent trustee with no ‘product’ to sell, no external investors to placate and no layers of internal red-tape to negotiate, we remain best placed to act in the best interests of our clients, whether or not that ultimately results in some clients being advised to close down their structures.

That’s what we mean when we say “FOCUSED ON YOU”.