Technical article
United Kingdom: I Set Up a Trust in London and Moved to Spain. Does the UK Still Tax It?
From 6 April 2025, UK inheritance tax moved from domicile to long-term residence.
Imagine a man who lived in London for 25 years. He sets up a family trust holding shares and a flat abroad, then retires to Spain. His children live in Spain and Canada. Does he leave UK tax behind when he goes?
The sources say the UK looks at his history in the UK. It does not look at where the children live.
The test since April 2025
From 6 April 2025, UK inheritance tax moved from domicile to long-term residence. A person is a long-term UK resident if they were UK resident for 10 of the 20 tax years before the event in question. A long-term resident is within UK inheritance tax on assets worldwide.
For a trust, the test sits with the settlor. Assets outside the UK that sit in a trust are excluded property, which means outside UK inheritance tax, only if the settlor is not a long-term resident at the time of the charge. UK assets and value from UK residential property stay chargeable either way.
How long the reach lasts after leaving
A person who leaves the UK stays in the net for a tail of 3 to 10 years, depending on how many years they lived there.
| Years of UK residence | Years in the net after leaving |
|---|---|
| 10 to 13 | 3 |
| 14 | 4 |
| 15 | 5 |
| 16 | 6 |
| 17 | 7 |
| 18 | 8 |
| 19 | 9 |
| 20 | 10 |
The table is from two tier B firm guides, HaysMac and KPMG, that agree on the range. The man in the example has been resident for all of the last 20 tax years, so his tail is 10 years from the day he leaves.
What the trust pays while he is in the net
A discretionary trust set up in life pays tax at entry. The rate is 20% on the part above the settlor's nil-rate band of GBP 325,000 (about US$420,000), which is half the 40% death rate. The band is frozen until the end of the 2030-31 tax year. Every 10 years the trust pays up to 6% of its value above the band. Between those dates, money leaving the trust bears an exit charge, a fraction of the 6%.
If the settlor dies within seven years of the gift, the tax is recalculated. The seven-year tax-free rule does not help a gift that is part of a trust, according to the UK government's website.
What happens when he stops being a long-term resident
The trust's status can change over the settlor's life. When the settlor stops being a long-term resident, an exit charge of up to 6% can arise on the foreign assets. One firm calls it potentially punitive. The sources add that a trust can also move back in if the settlor becomes a long-term resident again.
A rule for trusts set up on or before 30 October 2024 protects assets from the charge on gifts where the settlor kept a benefit, if the trust stays settled and outside the UK. It does not cover the 10-year and exit charges, according to one firm's account (tier B).
Income tax follows a different clock
UK income tax follows residence in each year. A UK-resident settlor who, or whose spouse, can benefit from a non-UK trust is taxed on its income and gains as they arise. After he moves to Spain, that charge depends on his own residence. A trust whose trustees are UK-resident stays UK-resident for tax, whatever the settlor does.
You could
You could count your own years of UK residence in the last 20 tax years, then look up the tail on the table. You could ask where the trustees are resident and where the trust assets sit.
Have you left a country and found its tax rules followed you? Tell us how it went. Someone planning a move may find it useful.
Figures are estimates for planning, based on public data. Date read: October 2026.
Sources
- HMRC Inheritance Tax Manual IHTM47001 and IHTM42001 (A)
- GOV.UK inheritance tax thresholds (A)
- GOV.UK gifts and trusts and inheritance tax pages (A)
- GOV.UK non-resident trusts guidance (A)
- HaysMac on the residence-based regime (B)
- KPMG on non-dom reform (B)
- Saffery on offshore trusts (B)
- Kreston Reeves on offshore trust charges (B)
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