The Regime That Is Gone
The protected-settlement regime introduced in 2017 was an architecture. A non-UK-domiciled or deemed-domiciled settlor who had established a non-resident trust before becoming deemed domiciled enjoyed two protections: the income arising to the trust was treated as Protected Foreign-Source Income under section 628A ITTOIA 2005 and not taxed on the settlor on an arising basis, and the trust's gains were blocked from attribution to the settlor under section 86 TCGA 1992 by a specific carve-out for non-doms. A narrow anti-tainting rule at section 628B–628C ensured that neither benefits nor additions by the settlor after 6 April 2017 corrupted the PFSI status.
From 6 April 2025, that architecture is gone. HMRC's Trusts, Settlements and Estates Manual at TSEM4710 confirms the repeal in terms: "sections 628A through to section 628C and section 630A ITTOIA 2005 have been repealed." TSEM4705 frames the policy intent: "the protection from tax on foreign income and gains arising within offshore settlor-interested structures is no longer available for individuals previously classed as non-domiciled or deemed domiciled under condition B in the UK, even if the income and gains remain offshore."
The common rejoinder on advisor calls is: "We are going to let the trust run off." That answer conflates the repealed protection with the surviving machinery. The protection is gone. The machinery is not.
What Survived, and What It Now Does
Five attribution pathways survived the reforms. They were always in the statute book; they were previously muted for the non-dom cohort and are now at full force.
Section 624 ITTOIA 2005 — the settlements code. Income of a settlor-interested settlement is taxed on the settlor as it arises. Before 2017, this was the primary route; between 2017 and 2025 it was blocked for non-dom and condition-B deemed-domiciled settlors by the PFSI rules. From 6 April 2025, the block is gone. UK-resident settlors of existing offshore settlor-interested trusts are taxed on the trust's ordinary income as it arises within the trust, irrespective of whether it is distributed.
Section 86 TCGA 1992 — settlor attribution of gains. Gains of a non-resident trust in which the settlor (or associated persons) has an interest are attributed to the UK-resident settlor and taxed as their own. Between 2017 and 2025, the settlor-side non-dom carve-out blocked attribution for protected settlements. From 6 April 2025, the block is removed, and UK-resident settlors are attributed the trust's chargeable gains on an arising basis (HMRC CG11030; RFIG45500).
Section 720 ITA 2007 — Transfer of Assets Abroad, transferor income charge. A UK-resident individual who made a transfer of assets, and has power to enjoy the resulting income, is taxed on that income as if it were their own. From 6 April 2017 to 5 April 2025, the remittance basis limited the charge for non-doms to the extent that income was remitted. From 6 April 2025, the remittance shelter is gone, and section 720 applies on an arising basis. HMRC guidance at INTM603675 confirms the operational change.
Section 731 ITA 2007 — benefits charge on non-transferors. From 6 April 2025, section 731 has reverted to applying only to non-transferors (INTM603705). Between 2017 and 2025 it reached transferor-settlors in respect of non-PFSI foreign income; that extension is reversed. Non-transferor UK-resident beneficiaries who receive benefits out of an offshore structure are caught by section 731, matched against available relevant income on the standard rules.
Section 87 TCGA 1992 — capital payments to beneficiaries. Capital payments from a non-resident settlement are matched against the section 2(2) amount (the trust's historic gains pool) on a last-in-first-out basis, and the matched amount is attributed to the UK-resident beneficiary as a gain. The regime is unaffected by the 2025 reforms except in one respect: the remittance basis no longer shelters capital payments received by UK-resident beneficiaries from foreign-source matching (HS294 2025/26 onwards).
Three subsidiary provisions operate behind the five primary ones:
- Schedule 4C TCGA 1992. Where trustees have made a transfer of value to which Schedule 4B applies, Schedule 4C replaces section 87 matching with its own pool. Wholly complementary; relevant whenever a trust has undertaken a dividend or capital distribution that triggered Schedule 4B (CG39255).
- Section 643A ITTOIA 2005 — benefits charge on settlor or close family member. From 6 April 2025, the benefits charge applies where a UK-resident settlor or close family member receives a benefit and there is available protected income (the stockpiled PFSI or TTI). The charge taxes the beneficiary on the matched amount. See TSEM4720 and the worked example at TSEM4725.
- Offshore income gains (OIGs). Distributions out of non-reporting offshore funds held by the trust are matched and taxed under the investment-funds regime (IFM13432); matching runs in a stated priority against OIGs before ordinary gains.
The Stockpile: What Happens to Pre-2025 PFSI and TTI
The dismantled protection did not evaporate the income that accumulated under it. Income that arose between 6 April 2017 and 5 April 2025 and was classed as Protected Foreign-Source Income, and income from 6 April 2013 to 5 April 2017 classed as Transitional Trust Income under the old section 628C ITTOIA 2005, is now frozen in a pool attached to the trust. The pool is not itself taxable. It becomes taxable when matched against a post-5 April 2025 benefit under section 643A.
TSEM4725 walks through the mechanics. The trustees received foreign income of £500,000 per year from 2017/18 to 2024/25, undistributed, which under the old rules qualified as PFSI. Mr A was not taxable on those amounts in those years. From 6 April 2025, the full historical PFSI pool sits against the trust, available for matching. If Mr A receives a benefit of £300,000 in 2025/26, the benefit is matched against the stockpiled PFSI and taxed on Mr A at his marginal income tax rate in 2025/26. The underlying income was protected; the benefit is not.
The stockpile produces three practical consequences.
First, the trustee cannot safely ignore the pool simply because the protections are gone prospectively. The pool is evidence of tax-deferred income that the UK fisc will claim on first matching.
Second, the matching order under section 643A applies PFSI before TTI, and both before untaxed income, so trustees cannot cherry-pick to minimise settlor exposure; HMRC's priority rules control the sequence.
Third, the close family member extension (section 643A and TSEM4720) means that a benefit paid to the settlor's spouse, minor child, or close relative, where that recipient is UK-resident and the settlor is UK-resident, can still fall to the settlor or the close family member under the matching rules. Distributing to a UK-resident adult child does not shift the tax off the settlor unless the child is outside the close family member definition.
The Tainting Legacy
The concept of tainting — a protected settlement losing its PFSI status because the settlor added property or conferred a benefit on themselves after 6 April 2017 — was central to pre-2025 trust management. TSEM4615 and INTM603360 record the old rules: once tainted, the settlement never recovered, and all subsequent income was attributable to the settlor.
From 6 April 2025, tainting is a retrospective concept, not a live risk. There is no protection left to taint. But the legacy analysis still matters in two scenarios. A trust tainted between 6 April 2017 and 5 April 2025 lost its PFSI status for years from the taint onwards, so its stockpile is smaller than a clean trust's. The difference between £4m of stockpiled PFSI and £500,000 is the difference between a decade of matching and a single bad year. In the second scenario, a historic tainting event may have created settlor attribution under section 624 or section 86 during the 2017–2025 window that was under-reported at the time, and a discovery assessment under section 29 TMA 1970 may still be possible within the four/six/twenty-year window depending on behaviour.
Neither is a matter of current compliance design. Both are matters of trust due diligence when a new settlor-advisor relationship begins, and they should be the first workstream in any Boru engagement on an existing structure.
Four Decisions a Trustee and Settlor Face Now
Every existing offshore settlor-interested trust settled by a UK-resident settlor sits in one of four architectural postures. The choice among them is a function of the trust's purpose, the family's mobility, the size of the stockpile, and the long-term resident IHT position of the settlor.
Keep and strip. The trust remains in place, and the trustees manage its assets so that the settlor-attribution and benefits-charge exposure is minimised year by year. Trust income is stripped to UK-compliant forms where possible; investment selection emphasises growth over yield; distributions are either avoided entirely during the settlor's UK residence or timed against known stockpile matching priorities. Suitable for trusts with a long-dated purpose (succession, legacy continuity) and settlors with no near-term exit from the UK. Most expensive as a running cost, because the arising-basis income tax and capital gains tax are paid annually; cheapest as a structural change.
Collapse to the individual. The trust is wound up and its assets distributed to the beneficiaries (or the settlor, if a beneficiary). The distribution triggers matching under section 87 and section 643A against the full historic pools, producing a single significant tax charge in the year of winding-up. After the charge is paid, the assets are in the individuals' hands and the compliance burden ends. Suitable for trusts whose original purpose (non-dom wealth protection) is no longer served and where the stockpile is small enough that single-year matching is economically tolerable.
Migrate the settlor. The settlor departs the UK under the Statutory Residence Test, runs through the long-term resident IHT tail per long-term-resident-iht-tail-planning, and the attribution regimes cease to apply once the settlor is non-resident — with the notable exception of the temporary non-residence rules and the ongoing exposure of UK-resident beneficiaries. Suitable for settlors whose corridor destination (UAE, Ireland, another jurisdiction in the Boru corridor) is independently attractive and where the family's mobility profile supports a genuine departure. Not a standalone tax strategy; must fit the life.
Distribute and match. A deliberate series of distributions are made during the window when the settlor is still UK-resident but able to absorb the matching charges, paired where possible with TRF designation per non-dom-exit-trf-temporary-repatriation to cleanse the repatriation side. The stockpile is drained strategically, not catastrophically. Suitable where the trust's original purpose has lapsed, the settlor has liquidity for tax payments, and the beneficiaries are ready for direct ownership. The most demanding to execute well; the most technically satisfying when it works.
The four postures are not mutually exclusive over time. A trust can be kept and stripped for three years while the settlor's exit is prepared; the exit then triggers migration; the final stockpile is distributed in the tail years. Any sequencing is possible; not every sequencing is sensible.
The Trustee Reimbursement Trap
One specific post-April-2025 pattern is worth naming because it is new in character and is the single most likely source of advisor negligence claims over the next three years.
Where the UK-resident settlor is excluded from the settlement — that is, defined out of the class of beneficiaries to avoid the settlor-interested trust code — CGT attributed to the settlor under section 86 does not apply. But the Finance Act 2025 did not extend this exclusion to all the attribution pathways: the settlements code (section 624) and the transfer-of-assets-abroad rules (section 720) can still reach an excluded settlor in specific circumstances.
Charles Russell Speechlys' February 2026 analysis identified the crux: where the trustees of a non-resident trust wish to reimburse a UK-resident settlor for tax they have paid under section 720 or a non-section-86 attribution, the reimbursement itself can constitute a benefit that retaints the settlor as interested for other purposes, or may trigger section 731 / section 643A matching on the reimbursement. Not reimbursing, however, can cause the settlor to claim a credit against other trust income or to treat the tax as a deductible trust expense in future. Either direction carries its own tax and fiduciary consequences.
The practical answer is that reimbursement arrangements drafted before 6 April 2025 must be re-examined under the post-repeal regime. A reimbursement mechanic designed for a protected-settlement world can malfunction in the arising-basis world it now operates in, and the trustee's duty of care does not wait for the client's next instruction.
Frequently Asked Questions
Were protected settlements abolished on 6 April 2025?
The specific protections — sections 628A, 628B, 628C, and 630A of ITTOIA 2005 — were repealed by the Finance Act 2025 with effect from 6 April 2025 (HMRC TSEM4710). The attribution machinery that the protections muted — sections 624 ITTOIA, 86 and 87 TCGA, 720 and 731 ITA 2007, and 643A ITTOIA — remains in force and now applies to UK-resident settlors and beneficiaries on an arising basis.
What happens to the income that accumulated under the old PFSI rules?
It is stockpiled. Income classified as Protected Foreign-Source Income between 6 April 2017 and 5 April 2025, and Transitional Trust Income between 6 April 2013 and 5 April 2017, sits against the trust as available protected income. When a benefit is paid post-5 April 2025 to the UK-resident settlor or a close family member, it is matched under section 643A ITTOIA 2005 against the stockpile and taxed on the recipient at current rates.
Does the TRF help with trust benefits and capital payments?
To a specified extent. Capital payments under section 87 TCGA 1992 and benefits under section 731 ITA 2007 that would have been taxable on remittance in a prior year are within qualifying overseas capital for TRF designation. Matching with pre-2025 trust gains and the stockpiled PFSI interacts tightly with the trustee's own records. The analysis is run jointly at trustee and beneficiary level.
Is section 86 TCGA still blocked for non-doms?
No. The non-dom carve-out that blocked section 86 attribution for protected settlements was removed by the Finance Act 2025. UK-resident settlors of non-resident trusts in which they (or associated persons) have an interest are attributed the trust's chargeable gains on an arising basis from 6 April 2025.
Can a trust regain protected status if the settlor leaves the UK?
The protected-settlement category as a forward-looking status no longer exists. What happens when the settlor ceases to be UK-resident is that the settlements code and section 86 TCGA attributions stop catching them, because the taxpayer is no longer a UK resident. The income and gains inside the trust are then outside UK income tax and CGT from the date the settlor becomes non-resident (subject to temporary non-residence rules), although the IHT long-term resident tail continues to run on the settlor's estate per the separate IHT regime.
What is the position of a UK-resident beneficiary who is not the settlor?
A UK-resident non-settlor beneficiary is within section 87 TCGA on any capital payment matched against the trust's section 2(2) amount pool, and within section 731 ITA 2007 on any benefit matched against available relevant income. They are not within section 624 or section 86, which apply only to settlors. From 6 April 2025, the remittance basis no longer shelters such beneficiaries, so the matching charge is taxed on an arising basis.
HMRC did not abolish the offshore trust on 6 April 2025. It abolished the answer that offshore trusts had relied on since 2017. The trusts themselves remain legal, remain useful in narrower circumstances, and remain the vehicle of choice for families whose purposes go beyond the tax shield that just closed. What ended was the assumption that holding the structure, untouched, preserved anything at all.