What is an excluded property trust and how does it work for non-doms?

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Excluded property trusts were, for many years, a cornerstone of Inheritance Tax planning for wealthy non-UK domiciled individuals living in or connected to the UK, though the underlying rules changed substantially from April 2025. **The traditional structure** Under the old rules, if a non-UK domiciled individual settled non-UK assets into a trust at a time when they were non-UK domiciled, those assets became "excluded property" -- meaning they generally fell outside the scope of UK Inheritance Tax even if the settlor later became UK domiciled or UK-deemed-domiciled, and even after their death. **Why non-doms used them** This allowed non-doms to protect non-UK wealth from the 40% UK Inheritance Tax charge that would otherwise apply once they became deemed domiciled (typically after 15 of the previous 20 tax years of UK residence), providing long-term IHT shelter for foreign assets held in trust. **The April 2025 reform** From 6 April 2025, the UK replaced the domicile-based test for Inheritance Tax with a residence-based test, aligned with the wider abolition of the remittance basis and non-dom status. Under the new rules, Inheritance Tax exposure is generally based on how long an individual has been UK tax resident, rather than their domicile status -- this significantly changed the protection that excluded property trusts provide going forward. **Transitional protection for existing trusts** Trusts settled before the rule changes were announced (broadly, before the Autumn 2024 Budget on 30 October 2024, subject to the detailed transitional provisions) may retain some protection under transitional rules, but new trusts and additions to existing trusts made after the reforms are generally subject to the new residence-based regime. **Complexity and the need for advice** The interaction between the old excluded property trust rules, the transitional provisions, and the new residence-based Inheritance Tax system is genuinely complex and continues to be clarified through further HMRC guidance and legislation -- anyone with an existing excluded property trust, or considering non-dom-related estate planning, should take specialist, regulated cross-border tax advice, since getting this wrong can be extremely costly. **Practical tip** Do not rely on older articles or general summaries of excluded property trusts written before April 2025 -- always confirm the current position with a specialist adviser, since this area of law changed fundamentally and continues to evolve.

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