Offshore trusts and UK taxation – Remittance basis and transitional reliefs from April 2025

By James Thomson, Tax Manager at Grunberg & Co.

In part one of this series, we explored the Inheritance Tax (IHT) reforms affecting offshore trusts with UK resident beneficiaries.

In this second instalment, we focus on the changes to the remittance basis and transitional reliefs for non-UK domiciled individuals, set to take effect from 6 April 2025.

These reforms mark a move away from domicile-based taxation towards a more residence-based system, tightening the rules around foreign income and gains (FIG) and how they are taxed in the UK.

End of the remittance basis from April 2025

From 6 April 2025, non-UK domiciled individuals who have historically claimed the remittance basis will face significant changes:

• The remittance basis will no longer be available to UK resident, non-domiciled beneficiaries in respect of foreign income and gains matched to trust distributions, even if they arose before 6 April 2025.
• UK Income Tax will be payable on 100 per cent of their foreign income and gains arising in the 2025/26 tax year.
• Non-domiciled and deemed domiciled settlors, who have been a UK resident for more than four tax years, will be directly taxed on trust FIG if they have created a settlor-interested trust.

Individuals who have been a UK resident for less than four years can continue to benefit from the four-year Foreign Income and Gains (FIG) regime.

However, it is important to note that individuals leaving the remittance basis after 6 April 2025 will not be eligible for the four-year FIG scheme.

Transitional options and residence planning

Non-domiciled individuals may still claim the remittance basis until 5 April 2025, potentially allowing them to defer UK taxation on capital payments and trust gains, subject to the applicable remittance basis charge (£30,000 or £60,000, depending on residence history).

Additionally, beneficiaries who have been UK resident for less than four years may utilise the four-year FIG regime to receive trust payments without immediate CGT or Income Tax implications.

The focus should now be on reviewing their UK residence position under the Statutory Residence Test.

In some cases, reducing time spent in the UK to cease being a UK resident may avoid exposure to UK tax on foreign income and gains.

Temporary Repatriation Facility (TRF)

To ease the transition away from the remittance basis, the Government will introduce a Temporary Repatriation Facility (TRF), available for three tax years, 2025/26 to 2027/28.

Under the TRF:

• Individuals who previously claimed the remittance basis can remit FIG arising before 6 April 2025 at preferential tax rates of:

• • 12 per cent in 2025/26 and 2026/27
  • 15 per cent in 2027/28

• The TRF will also apply to benefits received from offshore trusts during this period, provided the benefit is matched to FIG that arose within the settlement before 6 April 2025.

Importantly, FIG arising after 6 April 2025, or benefits not matched to pre-2025 FIG, will be subject to normal UK Income Tax rates.

Rebasing foreign capital assets

Another transitional measure allows non-domiciled individuals to rebase the cost of their foreign capital assets to their 5 April 2017 value, reducing future CGT exposure.

This relief is available where the remittance basis has been claimed previously.

Business Investment Relief ending

It is also worth noting that Business Investment Relief (BIR), which has allowed remittance basis users to bring funds into the UK tax-free by investing in qualifying companies, will cease from 6 April 2028.

Individuals relying on BIR may wish to review their investment strategy well in advance.

To discuss how these reforms impact your circumstances and to explore your best options for mitigation, speak to our specialist advisers today.