Capping Inheritance Tax trust charges for excluded property in trusts at 30 October 2024
Published 26 November 2025
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This publication is available at https://www.gov.uk/government/publications/capping-inheritance-tax-trust-charges-for-former-non-uk-domicile-residents/cap-inheritance-tax-trust-charges-to-5m-for-former-non-uk-domiciles-from-6-april-2025
Who is likely to be affected
This measure will affect trustees of former excluded property trusts, former non-domiciled individuals who settled the property into trust, and the trust beneficiaries.
General description of the measure
This measure introduces a cap on relevant property Inheritance Tax charges for trusts which held excluded property at 30 October 2024. The relevant property charges are capped at £5 million over each 10 year cycle.
This cap applies to settled property which was excluded property at 30 October 2024, and that is situated outside the UK at the time of the relevant charge.
Policy objective
The government is committed to addressing unfairness in the tax system, so that everyone who is long-term resident in the UK pays their taxes here. From 6 April 2025, the government removed the outdated concept of domicile status from the tax system and implemented a new residence-based regime which is internationally competitive and focused on attracting the best talent and investment to the UK. Under the new rules, when an individual is a long-term UK resident (broadly, they have been resident 10 years out of the last 20) non-UK assets they own personally, or in a trust they created, are in scope for Inheritance Tax.
The reform included transitional protections for former non-domiciled individuals, so that non-UK property in former excluded property trusts is not brought into inheritance tax on their death. This additional measure provides a limit in respect of trust charges arising every 10 years, or on exits. The cap relates to each trust in scope. Trustees remain liable to pay tax up to the cap amount, making a significant contribution to the exchequer, in addition to tax impacted individuals are expected to pay by remaining in the UK, as well as their wider economic contribution. New trusts, or trusts created by individuals who were not formerly non-domiciled remain chargeable in full.
Background to the measure
This measure was announced at Budget 2025.
Detailed proposal
Operative date
This measure will have retrospective effect from 6 April 2025.
Current law
Sections 44 to 46 Finance Act 2025 and Schedule 13 introduced changes to the Inheritance Tax Act 1984 (IHTA) to provide for a system where non-UK assets owned outright or in settlements come into scope based on an individual’s long-term UK residence.
The current law for relevant property trusts is contained in Part 3, Chapter 3 of the IHTA.
Proposed revisions
New section 75B will be added to the IHTA to provide for a relevant property trust’s future tax charges to be capped.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Nil | -5 | +110 | +155 | +140 | +110 |
The costing for this measure has been incorporated, alongside other measures, into the overall ‘Cap trust charges at £5 million for pre-30 October 2024 excluded property trusts for charges applying from 6 April 2025 and close post-departure trade profits loophole from 6 April 2026’ costing. More details can be found in Table 4.1 of Budget 2025.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will improve the residence-based regime to retain a small number of former non-domiciled individuals who settled property into trust. Trusts they settled can elect to cap subsequent Inheritance Tax charges on former excluded property. Individuals will need to familiarise themselves with the change.
This measure is not expected to impact on family formation, stability or breakdown.
This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change is an improvement to the existing residence-based regime.
Equalities impacts
An individual may be affected by this measure regardless of their protected characteristics. HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot make an assessment of the impacts on those with shared protected characteristics.
Administrative impact on business including civil society organisations
There is no impact on businesses as this measure only affects trusts and estates.
Trusts and estates practitioners and advisers may have one-off familiarisation costs and upskilling staff. It is not expected there will be ongoing costs.
This measure is expected overall to have no impact on business experience of dealing with HMRC as this change is a revision to the legislation to ensure it works as intended.
Operational impact (£ million) (HMRC or other)
There are no changes to HMRC IT systems. A minor change to reporting forms and associated guidance notes will also be made. HMRC processing and compliance resources are not impacted.
Appropriate taxpayer guidance will be published on GOV.UK.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through Inheritance Tax receipts data, plus communication with affected taxpayers and practitioners.
Further advice
If you have any questions about this change, email: personaltaxinternational@hmrc.gov.uk.