UK inheritance tax reporting: a post-2025 checklist for non-UK trustees

Insight

03.10.2025

The UK inheritance tax (IHT) landscape has undergone significant changes in the last decade, with major reforms in 2017 (and earlier) and, more recently, in April 2025, meaning that non-UK trustees managing cross-border trusts now need to actively consider UK IHT reporting and information gathering in light of these requirements. IHT, and all the complexity around IHT compliance, will now be a major feature in international trust administration.

Drawing on extensive experience advising trustees of high-value international trusts, this practical checklist highlights what trustees should look out for, when IHT reporting might be required, and how to navigate compliance and information gathering.

Excluded property: the pre-2025 rules

By way of brief reminder, before the April 2025 rule changes, trusts which were (a) settled by a settlor at a time when they were not UK domiciled or deemed domiciled, and (b) held non-UK situs assets only would generally be outside the scope of UK inheritance tax (ie excluded property).
Against this landscape, trustees should look out for additions of value to the trust fund after the settlor became deemed domiciled in the UK – those assets may be within the relevant property regime.
Trustees should also beware of transfers between trusts. Under the old rules, a trust to trust transfer would cause the settlor's UK domicile status to be re-tested. Trustees should be careful to check the settlor's domicile status at the time of each transfer. If the settlor was domiciled at the time of transfer/appointment between trusts, the new trust will be in the relevant property regime with 10-year reporting required.

Pre-2017/2025: always beware of UK situs assets

Even before the 2017/2025 changes, trustees have always had to watch out for (unexpected) UK situs assets. A particular trap can be art and chattels which, if held directly by the trust and physically located in the UK, will be relevant property and subject to the 10-year reporting etc.
Loans are another trap. Although many trustees take care to structure loans as Specialty Debts, we often come across trusts where there are informal or excess loans (typically recorded on the trust accounts ledger) made in excess of the formal Specialty Debt arrangements. If made to a UK resident beneficiary, those loans will be relevant property and subject to IHT reporting.

2017 changes: UK residential property and relevant loans

From 6 April 2017 onwards, trustees with any UK residential property in their structure have needed to grapple with UK IHT reporting. Typically, UK residential property had been held via non-UK holding companies (so that the trust owns a non-UK asset: shares in a non-UK company). However, from 2017 onwards, where value is attributable to UK residential property, that value will be relevant property.
An extra trap is that, where value is relevant property, the gift with reservation of benefit rules will apply. This means that if the settlor can benefit (which is typical), the value of the relevant property (ie the value of the UK residential property) will be treated as being within their estate when the settlor dies and subject to IHT at 40%.
Trustees also need to be alert to 'relevant loans'. Relevant loans are loans which are used for the finance and maintenance/enhancement of UK residential property. Trustees need to be actively asking/checking what loans to beneficiaries, particularly UK resident beneficiaries, will be used for. We have come across trusts where loans made to the UK beneficiary were in fact used to refurbish and maintain the beneficiary's own UK home. This is a relevant loan and is therefore subject to IHT reporting as relevant property. As above, if the settlor can benefit from the trust, the value of the loan will be relevant property within their estate under the gifts with reservation of benefit rules. While there may be a mirror deduction from their estate for IHT purposes if the loan is to the settlor, this will be an issue with no deduction if the loan is to another beneficiary.
A further trap is the two-year tail that will apply to shares with value attributable to residential property and relevant loans. Trustees need to know when 10-year anniversaries fall (not so easy – see below) and be up to speed with actions in the final two years before the anniversary date.

2025: a brave new world

Out with the old, and in with the new! All non-UK trustees who have a settlor with any UK connections now need to consider UK inheritance tax on an annual basis.
A trust's IHT status now tracks the settlor's IHT status with a relevant property 'tail', plus an exit charge on leaving the relevant property regime, which mirrors the settlor's own IHT tail as a long-term UK resident.
Where the settlor is living and internationally mobile, this means a new approach to actively tracking the settlor's personal IHT status, which in turn means fully understanding and reviewing their UK residence status year on year under the UK Statutory Residence Test rules. This level of granular detail is new for most trustees. Given the IHT liability and reporting obligation in relation to the IHT status of the trust is the trustees' responsibility, and not the settlor's, many trustees are seeking detailed, independent advice on their settlor's residence and IHT status.

10-year anniversaries: know your trust’s birthday

Knowing when the 10-year anniversary is (or if there are multiple anniversary dates) may not be so simple as looking at the date on the front of the trust deed. Where the trust has been funded by a transfer/appointment from another trust, the anniversary date will be the settlement of the first, transferor trust. If there have been multiple additions of value, the trust will have multiple 10-year anniversary dates.
Trustees must carefully plan ahead, tracking 10-year anniversary dates, mindful of the different applicable 'tails' (two years for relevant loans etc, varying tails tracking the settlor's status after he or she ceases to be long-term UK resident) and planning cashflow to meet IHT relevant property charges.

The reality of IHT reporting: significant information needed

If IHT reporting is required, the trustee will need to gather information to complete the relevant IHT forms. It is worth noting that the trustee has a duty to provide HMRC with full and accurate information. Much of the required information will be readily available to a trustee with well-kept records. However, if the trustee has not carried out similar reporting before it may well be that they do not have the requisite information (which can reach back decades) and a fact-finding mission will be necessary.
In advance of any such reporting, trustees will need to review their trust records to ensure they know:

1. The dates (if any) when the settlor was a long-term UK resident.
2. The dates (if any) when the settlor was domiciled or deemed domiciled in the UK.
3. Whether the settlor added any assets after the start of the trust. If so, what were those assets and how much did they increase its value by?
4. Whether the settlor made any trusts on the same day as the trust in question and, if so, the value of assets in that trust.
5. Whether the settlor made any 'chargeable transfers' seven years immediately before the trust started.
6. Whether the settlor is or ever has been resident in the UK for income tax purposes.
7. The country and town of the settlor's birth.
8. The settlor's nationality at birth and the time the settlement was made.
9. The settlor's domicile of origin.
10. The dates (if any) where the settlor left the UK to set up their main home abroad.
11. About the settlor's education and employment history.
12. Details about the settlor's visits to the UK, how long they stayed and the purpose of those visits.

For many trustees, this is information which may not have been needed previously (eg details of the settlor's employment history, and their visits and trips to the UK). Trustees should take steps now and in the coming months/years to ensure that this information is gathered from the settlor or (where the settlor is deceased) from living family to ensure that IHT reporting is smooth in the future.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.