The Advantages of a Cyprus Trust for British Non-Doms: A Strategic Financial Tool in Light of the UK’s 2025 Non-Dom Reforms

In April 2025, the UK government is set to eliminate the controversial non-dom status, ending a longstanding tax advantage that allowed UK residents to avoid paying tax on foreign income and gains. This shift is expected to have significant implications for high-net-worth individuals (HNWIs) and families who have historically enjoyed the benefits of this unique tax status. As the UK revamps its tax laws, British non-doms are actively seeking alternative wealth protection strategies. One of the most compelling options currently available is the Cyprus trust, which has gained increasing attention for its ability to offer both tax efficiency and asset protection.

What is a Cyprus Trust?

A Cyprus trust is a legal arrangement in which assets are held and managed by a trustee for the benefit of beneficiaries. Cyprus has become a popular jurisdiction for creating such trusts due to its favourable legal framework, attractive tax regime, and stable economic environment. Unlike the UK, Cyprus provides a straightforward, transparent, and highly beneficial trust regime that is particularly advantageous for British non-doms looking for a solution post-2025.

The Key Advantages of a Cyprus Trust for British Non-Doms

1. Tax Efficiency and Planning: One of the principal advantages of a Cyprus trust lies in its tax-friendly structure. Cyprus offers a robust yet flexible tax regime that benefits non-doms in several ways. Notably, income and gains held within the trust are not subject to Cypriot taxation, provided they are not derived from sources within Cyprus. This means that foreign income and gains can be accumulated in the trust without attracting Cypriot tax, which is a distinct advantage for non-doms whose wealth is often based outside the UK.

   Furthermore, Cyprus has one of the most competitive corporate tax rates in the EU (12.5%), which can benefit those non-doms looking to structure their wealth through companies or investment vehicles. The introduction of the Cyprus International Trust (CIT) ensures that these tax advantages are preserved, making it an attractive option for long-term wealth management.

   
   

2. Wealth Protection and Asset Security: Cyprus offers strong asset protection benefits through its trust laws. In the event of disputes or claims against an individual’s personal assets, the trust structure ensures that assets are legally shielded from creditors and potential litigation. For British non-doms who have substantial international wealth, protecting assets from unforeseen liabilities and claims is a top priority, and Cyprus trusts offer a safe haven from such risks.

   
   

3. Beneficiary Control and Flexibility: Cyprus trusts are designed to provide flexibility in terms of management and distribution of assets. British non-doms can appoint a trustee who will manage the assets according to their wishes, while still retaining control over how and when the beneficiaries receive distributions. Trusts in Cyprus can be tailored to meet specific requirements, whether for estate planning, tax mitigation, or succession planning, ensuring that the wealth remains in the family and is passed on according to the settlor’s intentions.

   
   

4. No Inheritance Tax in Cyprus: Cyprus does not impose inheritance tax, making it a particularly attractive option for individuals concerned about estate duties. For British non-doms, the prospect of inheriting assets without the threat of significant inheritance tax can significantly enhance the long-term value of wealth passed on to future generations. This becomes especially valuable in light of the UK’s inheritance tax, which can be as high as 40% on estates over the £325,000 threshold.

   
   

5. Access to Double Taxation Treaties: Cyprus has a wide network of double tax treaties, including with the UK, which helps to avoid being taxed twice on the same income. For British non-doms with international business interests, investments, or properties, this international tax network provides a level of certainty and efficiency in managing cross-border tax obligations. In comparison to some other trust jurisdictions, Cyprus’s treaty network is one of the most comprehensive in the world.

   
   

How is the Cyprus Trust Competitive Against Other Trusts?

Cyprus holds several advantages over other popular trust jurisdictions, such as Jersey, Guernsey, or the Isle of Man, making it an attractive choice for British non-doms.

1. Lower Set-Up and Maintenance Costs: Cyprus is typically more cost-effective than many other offshore jurisdictions. The initial set-up and ongoing maintenance of a Cyprus trust are generally less expensive, which makes it more accessible for a broader range of clients. For non-doms, who are likely to have multiple wealth structures, minimising administrative costs is a key factor in choosing a jurisdiction.

   
   

2. EU Jurisdiction with Stability: As an EU member state, Cyprus provides the stability and regulatory framework that is often lacking in non-EU jurisdictions. This guarantees a high level of legal certainty, which is a crucial consideration for long-term wealth planning. While the UK moves away from the EU framework, Cyprus maintains its status within the EU, allowing for easier management of cross-border assets, including those in the UK.
   

3. Private Trust Company OptionFor non-doms with large family estates, Cyprus also allows the creation of a Private Trust Company (PTC). This structure provides enhanced control over the management of the trust and ensures that family members can participate in governance, all while maintaining the trust's advantages. This is an option not available in some other trust jurisdictions, such as Jersey or Guernsey, which limits the settlor's ability to directly participate in the trust's management.

   
   

4. Reputation for Financial Services Excellence: Cyprus has developed a strong reputation as a leading financial services hub with highly experienced professionals in trust management, estate planning, and tax advisory services. This expertise ensures that British non-doms can benefit from the highest standards of advice and service when structuring their trusts. The UK’s withdrawal from the EU has driven many British HNWIs to seek alternative jurisdictions, and Cyprus has capitalised on its growing reputation as a trustworthy and professional jurisdiction.

   
   

Conclusion

As the UK prepares to abolish its non-dom status in 2025, British non-doms must act swiftly to preserve their wealth in the face of changing tax laws. Cyprus trusts offer a highly competitive and effective solution. With significant tax advantages, strong asset protection, and flexibility in managing family wealth, Cyprus stands out as an ideal jurisdiction for British non-doms seeking to minimise their tax exposure, protect their assets, and ensure long-term wealth preservation for future generations. The strategic use of Cyprus trusts can be a cornerstone in a comprehensive estate and tax planning strategy, ensuring that non-doms are well-positioned in an evolving global tax landscape.