The government has capped inheritance tax (IHT) trust charges for former non-doms at £5m per 10-year cycle in its Autumn Budget.

This will apply to relevant property trust charges for pre-30 October 2024 excluded property trusts, and will be legislated for in the Finance Bill 2025/26 to apply to trust charges from 6 April 2025.

The move has been seen by many as an effort to reduce the outflow of wealthy individuals from the UK, although there is skepticism as to how effective the measure will be.

"After so many headlines and lobbying about non-doms leaving the UK, there is only a little evidence in the Budget to show that the Chancellor has been listening,” said Taylor Wessing private client partner, Damian Bloom.

"For the wealthiest, there is a proposed cap on IHT charges for trusts at £5m over a 10-year cycle. This is certainly to be welcomed, as it was indeed this tax that caused many ultra high net worth (HNW) individuals to leave the country.

“Whether this is enough to prevent future departures, or encourage any returns, waits to be seen. For many it will be too little too late.”

Global talent consultation

Alongside the cap on IHT trust charges, the government also announced it would be launching a consultation on a global talent visa, which aims to attract top-level entrepreneurs to the UK.

This included proposals to explore how to develop its tax offer for high-talent new arrivals, aiming to build on the existing regime and support internationally mobile individuals to bring themselves and their businesses to the UK.

“Taken together, these two measures appear to be an acknowledgement that the changes announced in last year’s Budget to the non-dom regime went too far, that the UK has lost too many of these individuals, and that policymakers have to do more to stem this outflow and get the country back to becoming an attractive destination for wealth,” commented Utmost Wealth Solutions global wealth specialist, Marc Acheson.

“However, questions marks remain as to whether these measures will be effective in restoring trust among non-doms and the wider high net worth (HNW) community and prevent further departures.

“The £5m cap, while limiting the amount non-doms may ultimately have to settle, still represents a significant new charge for individuals who previously paid nothing before April 2025.

“Additionally, with the government announcing £26bn of tax-raising measures in this Budget alone, it is difficult to see how this will encourage new wealthy individuals to move to the UK.”

Bloom noted that the consultation on global talent could be an opportunity to link a global talent visa to the 4-year foreign income and gains (FIG) regime, which he said would be welcome, especially if it came with an extension of the visa from four to 10 years.

Allowance changes and other measures

The Budget also introduced changes to agricultural property relief (APR) and business relief (BR), bringing the allowances in line with others such as the nil rate band (NRB) and residence NRB, which can already be transferred to a spouse or civil partner if unused at death.

“For individuals who already have more complex trust arrangements to use their allowance on first death, it may now be appropriate to review those plans, as such they may no longer be necessary,” said St. James’s Place head of advice, Claire Trott.

“This is a highly complex area, and any changes or decisions should be approached with care and the guidance of a qualified professional, such as a financial adviser”.

While the government has announced changes that may be welcomed by HNW individuals, it also revealed that the IHT NRB freeze will be extended by a year to 2031.

“The IHT NRB has been frozen at £325,000 and the residence NRB at £175,000 until 2031,” said Hargreaves Lansdown head of personal finance, Sarah Coles.

“The NRB was introduced in April 2009, while the residence NRB hasn’t moved since April 2020, so they already both have significantly less value thanks to inflation since.

“It means that rises in the value of anything from investments to property risk pushing more people over the thresholds and into the realms of paying 40 per cent tax.”

Commenting on the Budget announcements aimed at attracting wealth the UK, Isio partner and head of private capital, Rob Agnew, said: "The Chancellor has clearly indicated a desire for the UK to become a hub for entrepreneurs and fast-growing firms.

“However, while the 2025 Budget includes some targeted measures, they appear insufficient to genuinely attract entrepreneurs - particularly when set against the profound impact of previous reforms to capital gains tax and IHT.

"Elsewhere, the Budget has doubled the eligibility thresholds for Enterprise Management Incentives (EMI) and increased the limits for Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) to £10-20m for Knowledge Intensive Companies (KICs).

“Yet despite these advancements, their attractiveness is diluted by other measures, such as the reduction in income tax relief on VCTs from 30 per cent to 20 per cent.

"For wealth creators and entrepreneurs looking either to pass businesses to heirs or to exit after successful ventures, the cumulative burden of these policies can often outweigh the incentives.

“Ultimately, the Budget is notable more for what it omits than for what it includes, particularly the absence of substantial reforms to the tax and succession landscape that could meaningfully drive national investment.

"Taken together with recently announced increases in capital-based and property-related taxes, and earlier restrictions on pensions and inheritance, the broader direction of taxation for the wealthy in the UK indicates a continuing trend of targeted tax hikes on wealth creators.

“For globally mobile individuals, this looks less like an invitation to relocate to the UK and more like a signal that the country is increasingly aiming to fund social and investment priorities by relying more heavily on accumulated wealth and asset-derived income.

"This creates a growing disconnect. The UK continues to offer deep markets, a strong rule of law and public-investment-led growth, yet the tax trajectory for the wealthy remains one-way.

"This is unlikely to halt - and may indeed reinforce - the trend for entrepreneurs and HNW individuals to diversify their residences and establish alternative bases in other jurisdictions, such as the UAE."

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