The phrase “don’t let the tax tail wag the dog” is one we hear often in the world of wealth management. Yet, following Labour’s announcements of proposed changes that proverbial tax tail—particularly the 10-year inheritance tax tail —has become a central point of discussion and concern for many of our UK-resident, non-domiciled clients.
This period of uncertainty has understandably led many clients to adopt a “wait and see” approach as they await the outcome of the upcoming Budget. However, this does not mean that trustees, clients, and advisors are sitting idle. Instead, this time is being used proactively to take stock of assets, consider how they are structured, and examine what truly matters to clients beyond just tax implications.
Relocation trends
It has been widely reported that some non-domiciled individuals are already leaving the UK, relocating to jurisdictions such as Italy, Dubai, and Monaco. For certain wealthy individuals who are highly mobile, this decision to move is a straightforward response to the potential tax implications following Labour’s announcements earlier this year. Relocation, while significant, can often be easier to execute for those whose businesses and assets are already global. However, for many clients, leaving the UK is not always a viable solution. Personal circumstances, including family commitments, lifestyle choices, and business ties, often make such a drastic move less appealing. Relocating for tax reasons alone may not always align with a family’s broader goals or lifestyle preferences, and trustees and advisors must consider the entire context when discussing options with clients.
Proactive planning
In the lead-up to the Budget, we are actively working with clients and advisors to ensure that their wealth structures are as robust as possible in light of the proposed changes. This includes exploring different planning strategies and engaging in discussions with clients to ensure they can make informed, timely decisions. For some, this includes considering the exclusion of settlors from their own structures to mitigate changes to protected trusts and the excluded property regime for inheritance and income tax. In other instances, clients are reviewing their wealth structures and where appropriate, realising gains ahead of the Budget to minimise the future gains that could potentially be taxed directly on the settlor under the new regime, and potentially in a higher rate environment. For many clients, the ‘wait and see’ approach is the right course of action, given the unknown. These proactive discussions ensure that clients are prepared to act swiftly, if necessary, once the specifics of the new tax policies are made clear.
Beyond tax advantages
As we await further clarification on Labour’s proposed changes, it is crucial to remember that the benefits of trusts extend far beyond their tax advantages. Trusts have existed long before the advent of the non-dom regime and will continue to serve as a flexible and effective wealth planning tool for generations to come. Trusts offer a multitude of benefits beyond tax mitigation, including asset protection, succession planning, and the ability to manage complex family and business interests across multiple jurisdictions. When considering their options in the run-up to the Budget, clients should not lose sight of these broader benefits, which can provide stability and long-term protection for their families and their wealth.
Multigenerational and cross-border planning
Each family and business are unique, and what works for one client may not be suitable for another. While tax planning is important, it is just one part of the equation. Clients should be considering what is most important to them and their families beyond the financial aspects, such as lifestyle, business interests, and long-term goals. The flexible nature of trusts makes them adaptable to changing tax landscapes and evolving family needs. Trust structures can be quickly adjusted if tax policies shift, or if beneficiaries relocate to new jurisdictions. For wealthy individuals, it is critical to consider all available options for holding and transferring wealth, especially in light of the upcoming Budget. We work closely with our clients and their advisors to ensure that the best possible solution is tailored to each client’s specific circumstances. Whether that involves accelerating gifting, excluding settlors, establishing offshore insurance bonds, realising gains, or even relocation, every decision must be carefully weighed in the context of the client’s broader financial and personal situation. Modern families, particularly high-net-worth families, are increasingly global. It is not uncommon for family members to move between jurisdictions at different stages of their lives, with family branches spreading across the globe over time. Trust structures offer an effective solution for managing wealth in these complex, multigenerational, and cross-border contexts.
At HIGHVERN, our team of professionals specialises in the structuring and administration of wealth solutions for UK-resident, non-domiciled clients. We are well-equipped to guide our clients through this period of change, simplifying complex issues and working with top-tier advisors to deliver comprehensive succession planning and wealth management strategies.
