From 6 April 2025 UK Inheritance Tax (IHT) is tied to the length of your tax residence rather than to your domicile. Worldwide assets fall within the charge for anyone who has been UK tax resident for at least 10 of the previous 20 tax years — such a person is a long-term resident. After leaving the country that status continues for a further three to ten years, depending on how long you lived here.
What residence-based IHT is and why domicile is no longer the deciding factor
Until April 2025 the reach of UK inheritance tax was set by domicile — a common law concept describing not where a person lives but the country of their permanent connection. A domicile of origin passed from the father, was extremely difficult to shed, and after 15 years of UK residence HMRC treated a person as deemed domiciled in any event. Those who retained a foreign domicile kept their non-UK assets outside the estate for IHT purposes.
The reform replaced that construct with an arithmetical test. What matters now is the number of tax years in which you were UK tax resident. Once 10 of the last 20 have accumulated you are a long-term resident, and IHT applies to worldwide assets: overseas property, bank accounts, shareholdings and investment portfolios. If they have not, only UK-situs assets are chargeable — UK property, shares in UK companies and funds held with UK banks.
Three groups were affected at once. Former non-doms who had paid tax on the remittance basis for years lost the shelter around their overseas assets. People who had already left discovered that their link with HMRC does not end on the day of departure. And new arrivals gained a clear, if demanding, countdown: ten years, and worldwide assets sit inside the IHT net. The mechanics are set out in Schedule 13 to the Finance Act 2025.
Who counts as a long-term resident: the 10-out-of-20-year test
The test itself is straightforward: a person is a long-term resident in a tax year if they were UK tax resident in at least 10 of the 20 tax years immediately preceding the year in which the chargeable event arises — death, a lifetime gift, or a transfer of assets into trust. HMRC sets out the wording in its guidance on Inheritance Tax if you are a long-term UK resident.
Importantly, the 10 years do not have to be consecutive. Three years of residence, a five-year gap and a further seven years take you over the threshold. That is what makes the new test uncomfortable for people who spent years living between two countries: a pattern that once helped preserve a foreign domicile now simply adds up.
Separate rules for young people and former deemed domiciles
A person under 20 has no full 20-year period behind them, so a separate rule applies: they are a long-term resident if they were UK tax resident for at least half of the tax years since their birth, rounded up. For a nineteen-year-old that means 10 years out of 19. The rule appears at IHTM47024 in HMRC’s Inheritance Tax Manual.
A transitional rule applies to those who were deemed domiciled on 30 October 2024 and became non-resident in the 2025 to 2026 tax year: they remain long-term residents until the start of their fourth year of non-residence. Anyone who was neither domiciled nor deemed domiciled on that date loses the status as soon as residence ends.
There is a symmetry on the way out. After 10 consecutive years of non-residence the test resets: even if the person returns, counting starts again and the earlier years no longer feature.
What Imperial & Legal support on inheritance tax covers
- Assessment of long-term resident status from travel history
- Calculation of residence years under the Statutory Residence Test
- Review of asset structure inside and outside the UK
- Examination of trusts and offshore structures against new rules
- Preparation of returns and supporting reporting for HMRC
- Timing of departure and return with the tail taken into account
- Representation of the client in correspondence with HMRC
How to count your years of UK tax residence correctly
A year for IHT purposes is the UK tax year running from 6 April to 5 April. Residence in each individual year is determined by the Statutory Residence Test (SRT), which weighs days spent in the country, available accommodation, work, family and other ties. You can get an initial view of your position for a given year through the UK tax residence test, although borderline years always need the facts examined properly.
Three points account for most of the errors:
- Split year treatment. A year split into resident and non-resident parts still counts in full as a year of residence for IHT. There are no half years in this test.
- The year of arrival and the year of departure. People often leave them out because they “were not here the whole year” — and understate the total by two years.
- Years before adulthood. If someone lived in the UK as a child with their parents and was tax resident, those years count as well.
The practical conclusion: reconstruct at least 20 tax years of residence history and support it with documents — passport stamps, boarding passes, tenancy agreements, filed tax returns. Those are the papers you will need if HMRC disagrees with your version of the count. The wider principles of UK taxation for arrivals are covered in tips on paying UK taxes.
How long the tail lasts after you leave the UK
Leaving the country does not end long-term resident status immediately. It follows a person for several further years — commonly called the tail. Its length depends on how many of the 20 years you were resident: a minimum of three years, a maximum of ten. The scale is set out at IHTM47020 in HMRC’s Inheritance Tax Manual.
| Years of residence out of 20 | Years the status continues after departure |
|---|---|
| 10 to 13 | 3 tax years |
| 14 | 4 tax years |
| 15 | 5 tax years |
| 16 | 6 tax years |
| 17 | 7 tax years |
| 18 | 8 tax years |
| 19 | 9 tax years |
| 20 | 10 tax years |
The difference between 13 and 14 years of residence looks cosmetic and costs a whole extra year inside the worldwide charge. For someone planning to leave who has already spent 12 or 13 years here, the date of departure stops being a question of convenience and becomes a question of arithmetic: a year of delay adds a year of tail and raises the chance that a chargeable event falls inside it.
What happened to excluded property trusts
The structure used to be robust: where a foreign-domiciled person settled non-UK assets into an offshore trust before becoming deemed domiciled, those assets acquired excluded property status permanently and stayed outside IHT, whatever happened to the settlor’s domicile afterwards. Most long-term structures for people moving to the UK were built on that footing.
From 6 April 2025 the status of non-UK assets in a trust depends on whether the settlor is a long-term resident at the time of the chargeable event. While they are, the trust’s overseas property is relevant property and falls within the periodic charging regime: a charge on every ten-year anniversary and an exit charge when property leaves the trust. Once the settlor ceases to be a long-term resident the assets return to excluded property — but that transition can itself give rise to a proportionate exit charge.
The anti-avoidance rules have been tightened separately. The measures published by HMRC under Inheritance tax: anti-avoidance close down the arrangement in which trust property was moved to the UK temporarily and then taken offshore once the settlor had lost the status, so as to sidestep an exit charge.
What this means in practice: old trust deeds no longer guarantee the old outcome. Every structure needs revisiting, with the date of settlement, the settlor’s status year by year, the composition of assets and the schedule of ten-year anniversaries all checked. A sensible starting point for that review is international tax and estate planning.
Rates, thresholds and reliefs: what is actually payable
The reform did not touch the calculation itself — only the range of assets it applies to. The main figures currently stand as follows.
| Item | Amount | Comment |
|---|---|---|
| Standard rate of IHT | 40% | Applies to the part of the estate above the tax-free threshold |
| Reduced rate | 36% | Where at least 10% of the net value of the estate passes to charity |
| Nil rate band (NRB) | £325,000 | Basic threshold, frozen to the end of the 2030 to 2031 tax year |
| Residence nil rate band (RNRB) | £175,000 | Additional threshold where a home passes to direct descendants |
| RNRB taper threshold | £2,000,000 | Above this estate value the RNRB reduces by £1 for every £2 of excess |
A spouse or civil partner inherits free of tax, and any unused threshold transfers to the survivor — in practice a married couple can pass on up to £1,000,000 free of IHT where the conditions on the home and direct descendants are met. How these thresholds apply to a particular estate is covered under wills and inheritance. The current figures are published in Inheritance Tax thresholds and interest rates, and the conditions for the RNRB in the guidance on the residence nil rate band.
This is where the effect of the reform bites. The thresholds have not risen and are frozen, the rate is unchanged, and for a long-term resident the base has widened to worldwide assets. For someone with a London flat and holdings abroad, the calculated liability can multiply without a single change to what they own.
Domicile and residence: what changed in practice
Setting the two regimes side by side shows where the line between the old and new rules actually falls.
| Criterion | Before 6 April 2025 | From 6 April 2025 |
|---|---|---|
| Basis for the worldwide charge | Domicile or deemed domicile | Long-term resident status |
| Threshold for entering the charge | 15 of 20 years for deemed domicile | 10 of the last 20 tax years |
| How it is established | Through intention, family history and factual ties | By counting tax years under the SRT |
| Position after departure | Domicile persisted until the country of connection genuinely changed | A tail of 3 to 10 years, then exit from the charge |
| Non-UK assets in an offshore trust | Excluded property indefinitely where the settlor was foreign domiciled | Relevant property while the settlor is a long-term resident |
| Complete reset of status | Required a change of domicile, extremely hard to evidence | 10 consecutive years of non-residence |
For some the new system is gentler: deemed domicile used to arrive in year fifteen and was hard to shake off, while a domicile of origin could revive on a move. Now the exit is calculable. For others it is harsher: the threshold has dropped from 15 years to 10, and trust protection is no longer permanent. Which group a person falls into depends less on the logic of the reform than on their own residence history and asset structure.
Tax support
Inheritance tax planning built around your situation
Status diagnosis
Reconstruction of 20 years of residence history and the year in which LTR status arises.
Asset structure review
Analysis of UK and overseas holdings, trusts and corporate layers under the new rules.
Wills and estate documentation
Wills drafted under English law alongside succession rules of other jurisdictions.
Reporting and HMRC support
Returns, IHT forms and representation of the client where HMRC raises enquiries.
How work on inheritance tax is structured
IHT planning is not a single exercise but a sequence spread over years. Below is a typical client journey from the first conversation through to passing assets on. The timings are indicative: they depend on how complex the asset structure is and how quickly supporting documents can be gathered.
Long-term resident assessment and asset mapping
Exposure modelling and choice of planning scenario
Restructuring of assets and review of trust arrangements
Wills, returns and reporting to HMRC
Ongoing support on departure, return and succession
Worked examples: how the status is counted in real situations
Three configurations come up most often. All figures are illustrative and set out to show how the count works, not to calculate tax for any particular person.
Arrived in 2013, resident throughout. By the 2026 to 2027 tax year 13 full years of residence sit inside the last 20. Long-term resident status arose in 2023 to 2024, when the count reached ten. All worldwide assets — including the family home abroad and a brokerage account in a third country — fall inside the IHT charge. Leaving now would produce a three-year tail.
Resident for 17 years, left in 2024. Here both the test and the transitional rule are in play. Seventeen years of residence give a seven-year tail, and deemed domiciled status on 30 October 2024 may additionally affect the first years after departure. Until the tail expires the worldwide estate remains chargeable, even where the person is already paying tax in another country.
Arrived in 2022 on a work visa. Around four years have accrued so far. LTR status will arise in about 2032. Until then IHT reaches only UK assets, such as a flat that has been purchased. This is the most comfortable window for planning: the asset structure is still flexible and decisions are not constrained by accumulated history.
Behind the abstractions there are always particular families. The stories below are Imperial & Legal clients whose tax planning around a move to the UK was dealt with before the position became irreversible.
Client stories on tax planning
Tax planning for married couple relocating to UK
Madina and Yuri are a married couple from Kazakhstan. They relocated to the United Kingdom a year ago when Yuri was invited to join a project to develop educational computer games. He agreed right...
Tax planning for a foreign person when moving and buying a property in England
Pablo is originally from South America. He has been living in Britain for several years. His business involves supplying construction equipment to...
Tax planning for married couple moving to England to settle (Indefinite Leave to Remain)
Tobias and Hannah moved to the UK from Austria. The couple received a pre-settled status, which is granted to EU citizens, permitting them to relocate...
Tax planning in England for a client with an investor visa
Andy is a long-standing client of Imperial & Legal. We helped him to obtain a UK investor visa and settle in London. He is originally from South Africa, but he changes locations quite often to...
One client described what it cost her to have left the family’s tax affairs in someone else’s hands for years.
I only vaguely remember how I relocated to the UK five years ago when my Frederik with whom we had spent almost the whole life together passed away. An old friend of ours found a company that helped me with all the relocation-related matters without my involvement. When it was time to apply for Indefinite Leave to Remain, I realised that I had lost contacts of that company and that I had forgotten about taxation and other important legal aspects. For that reason, I applied to Imperial & Legal.
Common mistakes in inheritance tax planning
Mistakes here are rarely exotic. Almost all of them come down to assessing a situation against the old rules, or by instinct, rather than against a calendar of tax years.
- Assuming a foreign passport shelters overseas assets. Nationality plays no part in the new test at all. Only residence under the SRT matters.
- Confusing tax residence with immigration status. A person can be tax resident without settled status and, equally, hold settled status without being tax resident in a given year.
- Assuming departure settles the question at once. A tail of three to ten years is the most common unwelcome discovery for those leaving.
- Relying on a trust settled many years ago. The deed may be unchanged, but the rules are not, and protection for overseas assets is no longer automatic.
- Putting off a will. Without one an estate passes under the intestacy rules, which can cut across both the family’s intentions and the tax logic.
- Ignoring foreign succession law. Forced heirship and reserved shares in other countries can redraw the whole arrangement.
- Keeping no evidence of travel. Reconstructing a date of departure ten years later is close to impossible.
All of these share one feature: they are cheap to correct in advance and expensive to correct afterwards. Examining a position before a chargeable event arises almost always leaves more options than examining it after.
What to consider when returning to the UK
The route back is not the mirror image of leaving. Where a person has left, served out the tail and returned, the earlier years of residence do not disappear: they continue to sit inside the 20-year window. Reaching 10 years within that window is enough to restore long-term resident status, even for someone who has only just come back.
Only one thing produces a full reset: 10 consecutive tax years outside UK residence. After that the counter clears and the person starts again as though arriving for the first time. For anyone leaving for the long term that figure becomes the reference point when planning visits, since a few extra days in an awkward year can make that year a resident one and break the ten-year run.
New arrivals who have not been UK tax resident for 10 consecutive years before arriving qualify for the four-year FIG (foreign income and gains) regime: for the first four years, overseas income and gains are relieved from UK tax. That applies to income tax and capital gains tax, not to IHT — the FIG regime has no bearing on when long-term resident status arises. The conditions are set out in the GOV.UK overview of reforming the taxation of non-UK domiciled individuals.
Related changes worth holding in the same plan
Residence-based IHT is not the only reform touching estate planning for wealthy families. Several other changes operate over the same horizons and frequently intersect within a single asset structure.
- Pension savings within the estate. From 6 April 2027 unused pension funds and associated death benefits are included in the value of the estate for IHT. Personal representatives carry the responsibility for reporting and payment.
- Agricultural and business property reliefs. From 6 April 2026 a combined allowance for agricultural property relief and business property relief of £2,500,000 per estate applies, with 50% relief on qualifying assets above that level.
- Temporary repatriation facility. Former remittance basis users can bring previously accumulated foreign income and gains into the UK across three tax years — 2025 to 2026, 2026 to 2027 and 2027 to 2028 — at a reduced rate of 12% in the first two years and 15% in the third.
These mechanisms are more closely linked than they appear: a decision on a trust feeds into the estate calculation, the window for the repatriation facility feeds into the choice of departure year, and the composition of pension assets feeds into the final figure. It makes sense to hold them in one plan, which is how tax planning for wealthy families is organised.
What timely advice on UK inheritance tax planning gives you
- Clarity on the year in which long-term resident status arises
- Exposure modelled across several scenarios for departure
- Trusts and ownership structures tested against the new rules
- Wills reconciled with the succession law of other countries
- Reporting prepared and correspondence with HMRC handled properly
- Days of presence tracked and supporting evidence preserved
- Annual review of the plan as legislation continues to change
None of these is a one-off exercise: the status moves with the calendar, so the plan is worth revisiting at least once a year. A short summary of the whole topic follows.
Key takeaways
- From 6 April 2025 the reach of UK IHT is set by residence, not domicile.
- A long-term resident is someone UK tax resident for 10 of the last 20 tax years.
- After departure the status continues for 3 to 10 years, depending on length of residence.
- Only 10 consecutive years of non-residence produce a full reset.
- Overseas assets in trusts are sheltered only while the settlor is not a long-term resident.
- The 40% rate and the £325,000 and £175,000 thresholds are unchanged — the base has widened.
Inheritance tax planning almost always turns on dates. The year you left, the year you came back, the year you signed a trust deed — each of them either widens the range of options or narrows it. The earlier the picture is drawn, the more choices remain available to the family.
This material is provided for information and is not individual tax or legal advice. How the rules apply depends on particular circumstances, so decisions about your own position are best taken after the facts have been reviewed with an adviser. The questions asked most often are set out below.
