When is a trust UK resident

A trust is UK resident for income tax and capital gains tax if all its trustees are UK resident. If the trustees are a mix of UK and non UK residents, the trust is UK resident only if a settlor was UK resident when they made the settlement, or immediately before death for a will trust. For settlements made before 6 April 2025, a UK domiciled settlor also counts.

Who is the taxpayer when a trust has several trustees?

For income tax, section 474 of the Income Tax Act 2007 treats the trustees of a settlement together as a single person, distinct from the individuals who happen to be trustees from time to time. Section 69(1) of the Taxation of Chargeable Gains Act 1992 does the same for capital gains tax. The question is therefore not whether each trustee is resident, but whether that single deemed person is. Changing trustees does not create a new taxpayer, but it can change the deemed person’s residence.

Inheritance tax works differently, and bare trusts are outside these rules altogether. Both points are covered further down.

When is a trust UK resident?

Section 475 of the Income Tax Act 2007 sets two conditions. If either is met at a given time, the trustees are UK resident at that time; if neither is met, they are non UK resident.

• Condition A: all the trustees are UK resident.
• Condition B: at least one trustee is UK resident, at least one is non UK resident, and a settlor meets condition C in section 476.

Section 69(2A) and (2B) of the 1992 Act contain matching conditions for capital gains tax, and section 69(2E) treats the trustees as non resident whenever neither condition is met. The test is applied at each point in time, so a trust can move in and out of residence during a tax year as trustees change.

How does the settlor decide residence when the trustees are mixed?

Under section 476, a settlor meets condition C as follows.

• If the settlement arose on the settlor’s death, by will, intestacy or otherwise, the settlor meets condition C if they were UK resident immediately before death.
• In any other case, the settlor meets condition C if they were UK resident when they made the settlement, or were treated as making it.

Once met, condition C lasts until the person stops being a settlor in relation to the settlement. Their later residence does not change it. Section 69(2C) of the 1992 Act uses the same relevant times for capital gains tax.

Finance Act 2025 removed domicile from the test from the 2025 to 2026 tax year. Section 476(3ZA) and section 69(2CA) keep it for older trusts: for a settlement that arose on death before 6 April 2025, or was made before that date, the test reads as UK resident or domiciled in the UK, and the deemed domicile rule in section 835BA applies. HMRC guidance on non resident trusts confirms that for trusts created on or after 6 April 2025 domicile is no longer a factor. It also says the settlor’s residence when funds are added is relevant, not only their residence when the trust was first set up.

How is each trustee’s own residence worked out?

• Individual trustees use the statutory residence test, like any other individual.
• Split years. If an individual becomes or stops being a trustee during a split year, and their only period as trustee falls wholly in the overseas part of the year, section 475(7) and (8) and section 69(2DA) treat them as non resident for the trust test.
• Corporate trustees are resident or not under the normal company residence rules.
• Professional trustees acting through a UK business. Under section 475(6) and section 69(2D), a non resident trustee who acts as trustee in the course of a business carried on in the UK through a branch, agency or permanent establishment is treated as UK resident for the test. An overseas trust company acting through a UK office can therefore make a trust UK resident.

What happens if a trust stops being UK resident?

Section 80 of the Taxation of Chargeable Gains Act 1992 applies when the trustees become non resident. They are treated as disposing of all the settled property immediately before that time and reacquiring it at market value. Gains on the whole fund are taxed even though nothing has been sold. The main exceptions are assets used in a trade the trustees continue to carry on in the UK through a branch or agency, and assets that a double taxation agreement would protect from UK tax on a disposal.

This is easy to trigger by accident. If the only UK resident trustee retires, or moves abroad, and the settlor does not meet condition C, the trust becomes non resident on that day and the exit charge follows. The CGT rules for trustees in trustees and capital gains tax then apply to the deemed gain.

What does non resident status change?

HMRC guidance on non resident trusts summarises the effects.

• Income tax. Trustees of a non resident trust pay UK tax only on UK income. Discretionary trustees pay 39.35% on dividend income and 45% on other UK income; interest in possession trustees pay 10.75% on dividends and 20% on other income from 6 April 2026.
• Capital gains tax. Non resident trustees do not usually pay UK CGT, but they are taxed on disposals of UK property and must report those within 60 days. Gains can instead be taxed on a UK settlor or on UK beneficiaries who receive capital payments; see offshore trusts with UK resident beneficiaries.
• Settlors. A settlor who, or whose spouse or civil partner, can benefit is taxed on the trust income as their own, with credit for UK tax paid by the trustees.

Does trustee residence matter for inheritance tax or bare trusts?

Not directly. HMRC’s guidance says inheritance tax charges on entry, at ten year anniversaries and on exit can arise whether or not the trustees or beneficiaries are UK resident. What decides whether non UK assets are in scope is the settlor’s position. From 6 April 2025 non UK assets in a trust are within inheritance tax if the settlor is a long term UK resident.

For a bare trust, section 60 of the 1992 Act treats the property as belonging to the beneficiary, and HMRC’s Capital Gains Manual at CG34320 says the trustee is disregarded. The beneficiary’s own residence is what counts, and section 80 does not apply.

How does this look in practice?

Illustration only. In 2022 Priya, then living and domiciled in the UK, set up a discretionary trust with two UK resident trustees. In 2026 one trustee emigrates and Priya moves abroad.

• The trustees are now mixed. Priya met condition C when she made the settlement, so the trust stays UK resident even though she has left.
• If the remaining UK trustee then retires and is replaced by a trustee in Jersey, all trustees are non resident. The trust becomes non resident and section 80 treats the whole fund as sold at market value that day.
• If the replacement was a Jersey trust company acting through a London branch, it would count as UK resident and the trust would stay resident.

What mistakes come up most often?

• Appointing an overseas relative as replacement trustee without checking whether condition C is met.
• Assuming the settlor’s current residence decides a mixed trust. It is their residence at the time of settlement, or immediately before death.
• Forgetting that pre 6 April 2025 settlements still look at domicile, including deemed domicile.
• Treating a non resident trust as outside UK reporting. It may still need to register and report UK property disposals.

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Related Accountapedia entries

• Is domicile still relevant for UK tax
• Offshore trust settlors after the 2025 reforms
• Types of trust and how each is taxed
• Trustees’ responsibilities for tax
• Excluded property trusts after April 2025
• Transfer of assets abroad rules

Sources

• legislation.gov.uk: Act 2007 c. 3, section 474
• legislation.gov.uk: Act 2007 c. 3, section 475
• legislation.gov.uk: Act 2007 c. 3, section 476
• legislation.gov.uk: Act 1992 c. 12, section 69
• GOV.UK: Non resident trusts
• legislation.gov.uk: Act 1992 c. 12, section 80
• legislation.gov.uk: Act 1992 c. 12, section 60
• GOV.UK: Manual page CG34320

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.