Inheritance Tax for UK Expats

The rules deciding who pays UK inheritance tax changed fundamentally on 6 April 2025. For a century and a half, the test was domicile. It is now residence. If you are a British expat, or thinking of becoming one, the change could bring your worldwide estate into the UK inheritance tax net when it previously sat outside it.

The Old Domicile Rules

Under the old system, a UK-domiciled individual was taxed on their worldwide estate. A non-domiciled individual was taxed only on assets situated in the UK, unless long residence made them “deemed domiciled” after 15 out of 20 years of UK residence. This is why many expats lived abroad for decades without their overseas assets being touched by UK inheritance tax.

The New Long-Term Resident Test

From 6 April 2025, domicile is no longer the test for inheritance tax. Instead, you are a long-term resident if you have been UK tax resident for at least 10 out of the last 20 tax years. Long-term residents are within the scope of UK inheritance tax on their worldwide estate at 40% above the nil-rate band.

If you do not meet the long-term resident test, only your UK-situated assets are within the scope of UK inheritance tax. Your overseas assets are excluded property.

UK Assets Are Always in Scope

Whatever your residence history, UK-situated assets remain taxable in the UK. This includes:

• UK property, whether owned directly or through an offshore company (since the 2017 reforms)
• UK bank and savings accounts
• UK shares and quoted investments
• UK pensions

Moving abroad does not move these assets out of the UK inheritance tax net.

The Leaver Tail

Leaving the UK does not immediately end your exposure. Once you are a long-term resident, your worldwide estate remains within the UK inheritance tax net for a tail after you leave, which depends on how long you were resident:

• 10 to 13 years of UK residence: a tail of 3 tax years
• 14 to 19 years: one additional year of tail per year of residence (14 years gives 4 years, 15 gives 5, and so on)
• 20 or more years: the maximum tail of 10 tax years

An individual who lived in the UK for 20 years and moves abroad in 2026 remains liable for UK inheritance tax on their global assets until 2036, unless the tail is interrupted by other residence events.

Trusts and Excluded Property Trusts

The reform also affects trusts. An excluded property trust settled by a non-domiciled individual used to keep non-UK assets permanently outside UK inheritance tax, even if the settlor later became UK domiciled. Under the new rules, protection depends on the settlor’s status at the time of the chargeable event. If the settlor is a long-term resident, the trust assets are within the scope of inheritance tax.

There is transitional protection for trusts settled before 30 October 2024, which retain partial protection until the settlor’s 10th year of residence. Trusts settled after that date receive no grandfathering. Anyone with an existing offshore trust should review its position urgently with a specialist.

The Spouse Election

The unlimited spousal exemption still applies to long-term residents. Where one spouse is a long-term resident and the other is not, the non-resident spouse can elect to be treated as within the UK inheritance tax net, restoring the full spousal exemption. The election previously lasted four years; under the new rules it lasts ten years, and it brings the electing spouse’s worldwide assets into scope. This is a significant commitment and should not be entered into lightly.

Planning for Expats

The residence-based rules reward deliberate planning:

• Keep records of residence. The 10-in-20 test turns on tax years of UK residence, so a clear record of where you lived each tax year is the foundation of any position you take.
• Check your tail. If you are a long-term resident planning to leave, work out how long the tail runs before assuming your worldwide estate is safe.
• Review offshore trusts. Transitional protection for pre-30 October 2024 trusts does not last forever.
• Use the ordinary reliefs. The nil-rate band, residence nil-rate band, business and agricultural relief, and lifetime gifting rules all still apply to long-term residents. Our guides to inheritance tax for individuals and lifetime gifting cover them in detail.
• Watch double taxation. If the country where you live taxes your estate too, a double taxation agreement may give relief against the UK charge.

International inheritance planning is not a do-it-yourself area. The interaction between UK residence, foreign inheritance taxes and overseas property ownership genuinely requires specialist advice.

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