Non-Resident Trusts

Introduction

Non-resident trusts create complex tax obligations for UK beneficiaries, settlors, and trustees. If you receive capital payments from a non-resident trust as a UK beneficiary, you may face Capital Gains Tax charges with additional interest penalties. Understanding who pays tax, when, and what reporting obligations apply is essential to staying compliant with HMRC.

What is a non-resident trust?

For trusts created on or after 6 April 2025, a trust is non-resident when either:

• None of the trustees are UK tax residents
• Only some trustees are UK resident and the settlor (the person who created the trust) was not UK resident when the trust was set up or when funds were added

For trusts created on or before 5 April 2025, the settlor's domicile status also mattered. Domicile refers to the country you consider your permanent home, where you have the closest ties. You can only have one domicile at any time.

The key point: from 6 April 2025, the domicile of the settlor no longer affects whether a newly created trust is non-resident — only the residence status of trustees and settlors matters.

Income Tax obligations for beneficiaries

If you're a UK resident beneficiary of a non-resident trust, you may need to complete a Self Assessment tax return using the SA107 supplementary pages to declare income received from the trust.

For UK residents receiving income from a non-resident discretionary trust, you can claim tax relief if the trustees have already paid tax on that income. This relief is available under Extra Statutory Concession B18.

If you're a non-resident beneficiary of a non-resident interest in possession trust, you only need to include UK source income on your tax return.

Income Tax obligations for settlors

As the settlor of a non-resident trust, you must pay tax on the trust's income as if it were your own income if either:

• You created the trust, and
• You, your spouse, or civil partner can benefit from the trust's income or capital

You receive a tax credit for any UK tax the trustees have already paid on the same income.

If you or your spouse cannot benefit from the trust, its income is not treated as yours. However, you still pay Income Tax if the trust makes payments to your unmarried children under 18. You can claim relief for this tax when the trustees are non-resident under Extra Statutory Concession A93.

Income Tax obligations for trustees

Trustees of non-resident trusts only pay UK tax on UK source income.

For most discretionary or accumulation trusts, trustees pay tax at:

• 39.35% on dividend income from stocks and shares
• 45% on UK interest if any beneficiary (or potential beneficiary) is UK resident
• 45% on all other non-dividend UK income

For interest in possession trusts, trustees pay tax at:

• 8.75% on trust dividend income up to 5 April 2026 (rising to 10.75% from 6 April 2026)
• 20% on all other types of income

Trustees declare UK source income using form SA900 (Trust and Estate Tax Return) and may need to complete form SA906 (Trust and Estate Non-Residence supplementary pages).

Capital Gains Tax and non-resident trusts

Trustees of non-resident trusts do not usually pay UK Capital Gains Tax. Instead, the settlor or beneficiaries may have to pay tax on gains made by the non-resident trustees.

There is one important exception: if trustees of a non-resident trust dispose of UK property or land, they may be liable to pay Capital Gains Tax. The tax rate is the same as for resident trustees, and the annual exempt amount is available. Trustees must report disposal of UK property or land within 60 days of completion.

Capital payments and the matching charge

When a UK resident beneficiary receives a capital payment from a non-resident trust, a complex "matching" process applies. This matches the payment against gains that the trust has made but not yet distributed.

The beneficiary may face a Capital Gains Tax charge on the matched gains. Additionally, HMRC applies a supplementary charge (effectively interest) to reflect the time that has passed since the trust made the gain. This "increase in tax charge" compensates for the deferral benefit.

This matching charge system is intricate and requires careful calculation when completing your Self Assessment return. Helpsheet HS301 provides detailed guidance on calculating this charge.

Reporting requirements

Different parties have different reporting obligations:

Beneficiaries receiving distributions must complete Self Assessment returns with SA107 supplementary pages for income distributions. Capital payments require completion of the capital gains summary pages.

Settlors who can benefit (or whose spouse/civil partner can benefit) must report trust income as their own.

Trustees must complete SA900 returns for any UK source income and potentially form SA906 for non-residence details.

From 6 April 2025, the foreign income and gains regime replaced the remittance basis. If you claim relief under this new regime, you won't pay tax on eligible foreign income and gains. A Temporary Repatriation Facility also became available from 6 April 2025, allowing reduced tax charges on certain remitted amounts.

Registering a non-resident trust

If you're setting up a trust that may be non-resident, you may need to register it with HMRC. The registration requirements depend on the type of trust and its activities. Contact the HMRC Trusts helpline to discuss overseas tax or non-resident trust issues before proceeding.

Sources

• Non-resident trusts
• Beneficiaries receiving capital payments from non-resident trusts and the calculation of the increase in tax charge (Self Assessment helpsheet HS301)
• Income and benefits from transfers of assets abroad and income from non-resident trusts (Self Assessment helpsheet HS262)
• Non-resident trusts and Capital Gains Tax (Self Assessment helpsheet HS299)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.