UK Inheritance Tax for Expatriates: How the Long-Term Residence Test Replaced Domicile
Updated: Aug 5
The short answer. Since 6 April 2025, UK inheritance tax no longer follows domicile. It follows residence. If you were UK resident in at least 10 of the previous 20 tax years, your worldwide estate is in scope. If you were not, only your UK assets are. And your UK assets stay in scope whatever your residence history: leaving the UK has never taken a UK house or UK bank account out of charge.
Key takeaways
Domicile was abolished as the test for UK inheritance tax on 6 April 2025. It was replaced by a long-term UK residence test in section 6A of the Inheritance Tax Act 1984, inserted by Finance Act 2025, Schedule 13.
The test is 10 out of 20. UK resident in at least 10 of the 20 tax years before the tax year of death, and your worldwide estate is in scope.
Leaving does not switch it off immediately. A tail of between 3 and 10 years runs after your last year of UK residence.
UK assets are always in scope. No amount of time abroad removes a UK property, a UK bank account or UK-situs shares from UK inheritance tax.
From 6 April 2027, most unused pension funds fall into the estate. This is now law: Finance Act 2026, sections 66 to 71.
The nil-rate band is £325,000 and is frozen until 5 April 2031.
What changed on 6 April 2025
For decades, one word decided whether the UK could tax your worldwide estate when you died. That word was domicile, and until 6 April 2025 it was a slippery, subjective, common-law concept that turned on your father's origins, your intentions, and where you meant to be buried. Expatriates spent fortunes arguing about it with HMRC, and often lost.
That era is over.
A note on the word "domicile". Domicile was the test that decided whether your worldwide estate fell within UK inheritance tax. It was abolished for inheritance tax purposes on 6 April 2025 and replaced by a long-term UK residence test. Where this guide uses the word "domicile", it is describing the position before that date. Your current exposure is decided by your residence history, not your domicile.
The change was announced at the Autumn Budget 2024 and enacted in Finance Act 2025, Schedule 13, which inserted a new section 6A into the Inheritance Tax Act 1984. The old deemed-domicile rule, under which 15 years of UK residence out of 20 pulled your worldwide estate into charge, was abolished for inheritance tax on the same date, as HMRC confirms at IHTM47001.
What replaced it is a mechanical, countable test. You either were UK resident in a given tax year or you were not. There is no argument about intention. For most expatriates this is good news: the test is knowable, and it can be planned around in a way that the old rules never really could.
It is worth being blunt about why this guide exists. Much of the expatriate material currently sitting on the first page of Google still tells readers that domicile decides their UK inheritance tax liability, a statement that has been wrong since 6 April 2025. Some of those pages date from 2017 and 2022. Some are undated. If you have been relying on what you read about domicile, this is the section to reread.
Am I still liable for UK inheritance tax if I live abroad?
Yes, in one of two ways. If you were UK resident in at least 10 of the last 20 tax years, you are a long-term UK resident, and your worldwide estate is within UK inheritance tax. If you were not, only your UK-situated assets are within it. Living abroad reduces exposure. It does not, by itself, end it.
The rule that did not change. UK-situated assets are within UK inheritance tax regardless of your residence history. Only property situated outside the UK can ever qualify as excluded property. If you have been non-resident for 25 years, have no intention of returning, and are not a long-term UK resident by any measure, a flat in Manchester, a UK bank account, a UK share portfolio and a UK-registered pension all remain within UK inheritance tax. See IHTM04311.
So there are two questions, not one, and you need both answers. First: am I a long-term UK resident? This decides whether your worldwide estate is in scope. Second: what do I own in the UK? This is in scope either way.
An expatriate who has been in Singapore for 20 years and answers no to the first question has still not finished. If the answer to the second is a buy-to-let in Leeds and an old ISA, there is UK inheritance tax exposure, and it sits above the nil-rate band or it does not.
The long-term UK residence test explained
The 10-of-20 rule
A person is a long-term UK resident, for a tax year in which a chargeable event occurs (including the tax year of their death), if they were UK resident in at least 10 of the 20 tax years immediately preceding that year. This is the rule in IHTA 1984 s.6A, and HMRC sets it out at IHTM47020.
The practical effect is simple: worldwide assets in scope. Your apartment in Lisbon, your Dubai brokerage account, your Australian superannuation, your holiday place in Provence. All of it.
How UK residence is decided
UK resident here means resident under the ordinary UK tax rules for the year in question. For 2013/14 onwards, that is the Statutory Residence Test. For 2012/13 and earlier, residence is decided under the old income tax rules that applied at the time.
That sounds like a technicality. For a long-departed expatriate it is not. If you left the UK in 2011, some of the years in your 20-year lookback are governed by the pre-2013 rules, which were vaguer and more fact-sensitive than the Statutory Residence Test that replaced them. Your 20-year window may straddle two different definitions of the same word.
Worked example: 12 years in London, now in Dubai
Priya moved to London in 2010 and left for Dubai in July 2022. Across the 20 tax years ending with her last year of UK residence, she was UK resident in 12 of them.
12 is more than 10, so on the day she left she was a long-term UK resident.
Her worldwide estate was in scope at that point, including everything she then acquired in the UAE.
Because she was resident in 12 of the 20 years, she needs three consecutive tax years of non-residence to shed that status.
Assuming she remains non-resident throughout, she stops being a long-term UK resident from 2026/27.
Her UK assets remain in scope for UK inheritance tax whatever happens, and whatever her status.
The inheritance tax tail: how long UK IHT follows you after you leave
This is the part almost nobody publishes, and it is the part that decides real outcomes.
Everyone writes "10 out of 20 years" and stops. Very few go on to explain what happens after you leave. Because the test looks backwards over a rolling 20-year window, your worldwide estate does not drop out of UK inheritance tax on the day your flight takes off. It drops out only once enough non-resident years have accumulated. That period is the tail, and its length is not fixed. It slides between 3 years and 10 years, and it depends on how long you were resident.
Read that chart slowly, because the shape of it is the single most useful thing on this page. Someone who was UK resident for 11 of their last 20 years is free of long-term UK resident status after 3 non-resident years. Someone who was UK resident for all 20 carries a 10-year tail. A decade. If they die in year nine abroad, their worldwide estate is taxed as though they never left.
Once 10 consecutive non-resident tax years have passed, the clock resets completely. Even a later return to the UK starts the count from scratch.
Worked example: when the tail actually runs out
Two colleagues leave the UK on the same day in April 2025, both for Portugal.
Tom arrived in the UK in 2013 and was UK resident for 12 of the 20 tax years ending 2024/25. His tail is 3 years. If he remains non-resident, he ceases to be a long-term UK resident from 2028/29. From that point his Portuguese assets sit outside UK inheritance tax.
Sarah was born in the UK and lived there her whole life. She was UK resident for all 20 of those tax years. Her tail is 10 years. She ceases to be a long-term UK resident from 2035/36, and not a day before. If she dies in Lisbon in 2033, her entire worldwide estate, Portuguese property included, is charged to UK inheritance tax at up to 40%.
Same departure date. Same destination. Same lifestyle. A seven-year difference in when their worldwide estate leaves the UK net.
Neither of them, at any point, takes their UK assets out of UK inheritance tax. Tom's and Sarah's UK property, UK accounts and UK shares stay in charge throughout the tail, and after it has run as well.
One transitional rule to know about
There is a transitional provision for people who were treated as deemed domiciled under the old rules on 30 October 2024. Broadly, it can limit the tail to 3 years rather than the sliding scale above. Whether it applies turns on the precise facts of a person's residence history, and it is worth establishing which regime your own timeline falls into before assuming either result.
If you are thinking about moving back to the UK
This section is included because the tail runs in both directions, and the arithmetic surprises people.
If you return to the UK and become UK resident again, those years will begin counting towards the 10-of-20 test once more. A person who left with a partial tail already running would find that a return restarts the accumulation rather than pausing it. And if 10 consecutive non-resident years had already elapsed before the return, the count would begin again from zero, which is the more favourable starting point.
The point to take away is that the year in which a return becomes effective for tax purposes will sit inside the same 20-year window that decides worldwide exposure later. It is arithmetic that would be worth understanding before a return date is fixed, rather than after.
Paratus Wealth provides services to individuals resident outside the United Kingdom. We are not able to act for you once you are UK resident.
What counts as a UK asset when you live abroad
If you are not a long-term UK resident, this list is the whole of your UK inheritance tax exposure. If you are one, this list is in scope anyway, along with everything else you own.
UK residential and commercial property. Directly held, always.
UK residential property held through a company or other structure. Schedule A1 IHTA 1984 remains in force. It was re-cut onto a residence basis by Finance Act 2025, and it still brings enveloped UK residential property into charge. Unwinding the structure does not take it out either.
UK bank and building society accounts.
ISAs. An ISA is tax-free for income tax and capital gains tax. It was never exempt from inheritance tax.
Shares in UK-incorporated companies, including shares held through an offshore platform or nominee account.
UK-registered pensions, from 6 April 2027.
Outside scope, but only if you are not a long-term UK resident: foreign property, foreign bank accounts, foreign securities, and non-UK settled property. This is what excluded property now means. It is not a category of asset. It is a status that depends on where the asset is situated and on the owner's residence history.
A word on trusts
Offshore trusts settled before the reforms are not "grandfathered". This is the most dangerous thing currently being said about the 2025 changes, and it is said constantly.
Non-UK settled property is excluded property only while the settlor is not a long-term UK resident. Assets move in and out of scope as the settlor's own status changes over time. A trust is no longer set and forget.
There is a protection for trusts settled before 30 October 2024, but it is far narrower than is commonly claimed. It addresses the gift-with-reservation charge, and the charge that would otherwise arise when a qualifying interest in possession subsisting on 30 October 2024 comes to an end. It does not prevent ten-year and exit charges once the settlor becomes a long-term UK resident, and it falls away entirely once a protected interest in possession ends and the trust continues. See IHTM47051. Anyone who has been told that a pre-reform offshore trust is safe should establish exactly which charges the protection actually covers, because it is very unlikely to be all of them.
A cap on trust charges was announced at Budget 2025 and is expected to be retrospective to 6 April 2025. It has been announced, not enacted. It is not law at the date of this guide.
The allowances: nil-rate band, residence nil-rate band, spouses
All figures are frozen until 5 April 2031, the end of the 2030/31 tax year, per GOV.UK inheritance tax guidance (updated 26 November 2025). The freeze was extended by a further year at Budget 2025, so it now runs to 2031, not 2030. Freezing a threshold while asset values rise is a tax rise by another name, and over six years it is a substantial one.
The nil-rate band of £325,000 applies whether you live in Dubai or Dorset. The residence nil-rate band adds £175,000, but only where a residence passes to children, grandchildren or other direct descendants. Expatriates often assume it is unavailable to them. It frequently is available, provided a UK home passes to direct descendants. The band is not conditional on your own residence.
The £2m taper is where it bites. For every £2 by which the net estate exceeds £2,000,000, the residence nil-rate band is reduced by £1. An estate of £2,350,000 loses the entire £175,000 band. Expatriate estates that include a UK property, an accumulated offshore portfolio and, from 2027, a pension can cross £2m far more easily than their owners expect.
Spouses: the trap that has replaced the old one
Transfers between spouses and civil partners are normally unlimited and exempt. Finance Act 2025 substituted "long-term UK resident" for "domiciled in the United Kingdom" throughout section 18 IHTA 1984, and in doing so it carried an old trap forward into the new regime in a new shape.
Where the transferring spouse is a long-term UK resident and the receiving spouse is not, the spouse exemption is capped at the nil-rate band, currently £325,000. Everything above that is chargeable. This is a common expatriate situation, not an exotic one. A British executive who has been UK resident for 15 of the last 20 years, married to a partner who has never lived in the UK, is exactly the profile.
New sections 267ZC to 267ZE IHTA 1984 allow the spouse who is not a long-term UK resident to elect to be treated as one. Where that election is made, the unlimited exemption applies. It is a genuine trade-off rather than a free option: it brings that spouse's own worldwide estate within UK inheritance tax, and it ceases only after 10 consecutive tax years of non-residence. It is a formal statutory election with its own conditions and time limits, which are set out in the legislation and are not reproduced here. Whether it makes sense in any particular case depends entirely on the size and location of each spouse's assets and on what is likely to happen on each death. This guide records that the election exists. It does not suggest that anyone make it, and nothing in this section is a recommendation either way.
Gifts and the 7-year rule for expatriates
A gift to an individual is a potentially exempt transfer. Survive seven years and it falls out of your estate entirely. Die within seven years and it comes back in. Taper relief then reduces the tax, on the sliding scale shown in Figure 3 above. Source: GOV.UK, inheritance tax on gifts.
Two points are consistently misunderstood, and they cost people money.
First: taper relief reduces the tax on the gift, not the value of the gift. The full value of the gift still counts against the nil-rate band. The taper only softens the rate applied to the excess.
Second, and following from that: if the gift falls within the nil-rate band, taper relief gives no benefit at all. There is no tax on it to taper. A £200,000 gift made four years before death is not taxed at 24% instead of 40%. If it sits inside the £325,000 nil-rate band it bears no tax, and it uses up £200,000 of the band that the rest of the estate then cannot use. People make gifts specifically to start a taper clock that, in their circumstances, will never do any work.
Gifts with reservation are the other trap. Give away the UK house and carry on living in it rent-free, and it never left the estate. This applies in exactly the same way to a UK property occupied on visits home.
The 36% reduced rate: leaving 10% to charity
Where 10% or more of the net value of an estate passes to charity, the rate of inheritance tax on the rest of the chargeable estate falls from 40% to 36% (GOV.UK).
The arithmetic is unusual and worth understanding. Because the reduced rate applies to the whole chargeable estate, the cost of reaching the 10% threshold is partly, and sometimes very substantially, offset by the tax saved. The net cost to beneficiaries of giving 10% away is far smaller than 10%. Net value here means the estate after the nil-rate band and other reliefs, not the headline figure, which is why the calculation needs doing properly rather than in your head.
Pensions enter the inheritance tax net from April 2027
This one is law, and it is the largest change coming.
For deaths occurring on or after 6 April 2027, most unused pension funds and pension death benefits are brought within the estate for inheritance tax. The measure is enacted in Finance Act 2026 (c. 11), sections 66 to 71, which received Royal Assent on 18 March 2026. Section 66 inserts a new section 150A into IHTA 1984, treating a scheme member as beneficially entitled, immediately before death, to property described as notional pension property. Section 71 is the commencement provision, applying the changes in relation to deaths occurring on or after 6 April 2027.
What stays outside the charge: death-in-service benefits from a registered pension scheme; dependants' scheme pensions from defined benefit and collective money purchase arrangements; charitable gifts from pension schemes. The spouse and civil partner exemption is preserved.
Why this matters more to expatriates than to almost anyone else. A UK pension is a UK asset. It is in scope for a non-resident regardless of long-term UK resident status. Someone who has spent 20 years abroad, is comfortably outside the 10-of-20 test, and holds a substantial SIPP has, from April 2027, a UK inheritance tax exposure they did not have before. For many expatriates the pension was the one large UK asset that still sat outside the estate. From April 2027, it does not.
The position differs considerably depending on where you are resident and what your scheme actually is, and the interaction with transfers to a qualifying recognised overseas pension scheme becomes materially more consequential as a result.
Double taxation: will my new country tax the same estate?
Possibly. The UK has 10 estate and inheritance tax treaties, and which one applies to you, or whether none does, changes the answer substantially. See GOV.UK, inheritance tax double taxation relief.
The modern treaties (post-1975): Ireland, South Africa, the United States, the Netherlands, Sweden, Switzerland.
The estate duty era treaties (pre-1975): France, Italy, India, Pakistan. These four are unusual, and for some people unusually valuable, because they do not recognise deemed domicile. They pre-date the concept.
No treaty at all: the UAE, Australia, Portugal, Spain and most other destinations.
Where there is no treaty, unilateral relief applies. The UK gives a credit for foreign tax paid on assets situated in that country, capped at the UK inheritance tax charged on the same assets. The practical consequence is worth stating plainly: unilateral relief stops the same asset being taxed twice over. It does not reduce your bill to the lower of the two countries' rates. If the UK rate is the higher one, the UK tops up to its own rate.
Where domicile still matters: treaties, wills and transitional rules
It would be tidy to say that domicile is dead. It is not accurate, and the inaccuracy runs in the dangerous direction, because it would leave a reader believing they have less exposure than they do.
Domicile was abolished as the test for UK inheritance tax on 6 April 2025. That is the whole of what was abolished. The concept survives, in the present tense, in at least three places that matter to expatriates.
1. The pre-1975 treaties. The estate duty era treaties with France, Italy, India and Pakistan allocate taxing rights by reference to common law domicile, not residence. HMRC confirms at IHTM47001 that domicile continues to be relevant where a double taxation convention invokes it.
2. Succession and wills law. Which country's law governs the validity of a will, and who is legally entitled to inherit, is a separate question from tax, decided by different rules. Forced heirship regimes across much of Europe operate on their own connecting factors. The change to the UK's inheritance tax test did not touch any of this.
3. Transitional inheritance tax rules. Chargeable events before 6 April 2025 are decided under the old law. Certain settled-property transitional rules still refer back to the previous concept. And the old elections under sections 267ZA and 267ZB IHTA 1984 are not repealed until 6 April 2032.
The correct summary is narrow and precise: domicile no longer decides whether a worldwide estate is within UK inheritance tax. It may still decide other things.
Three misconceptions that cost expatriates money
"I left the UK, so I am out of scope." Not yet, and possibly not for a decade. The tail runs for between 3 and 10 years after your last year of UK residence, and its length is set by your residence history, not by your intentions.
"I have a UK domicile of origin, so I am caught forever." This was the old fear, and it was well founded under the old law, where a domicile of origin could revive and was notoriously difficult to shed. It no longer governs inheritance tax. Since 6 April 2025 the question has been a countable one about tax years of residence. For a great many long-departed expatriates that change is straightforwardly good news, and some are still planning around a rule that no longer exists.
"Non-residents do not pay UK inheritance tax at all." UK-situated assets are in charge regardless of residence. A UK house, a UK bank account, UK shares and, from April 2027, a UK pension are all within UK inheritance tax no matter how long you have been away. This is the misconception with the largest cash consequences.
Frequently asked questions
Do I pay UK inheritance tax if I live abroad?
Yes, in one of two ways. If you were UK resident in at least 10 of the last 20 tax years, you are a long-term UK resident and your worldwide estate is in scope. If you were not, only your UK-situated assets are in scope. UK assets are always in scope, whatever your residence history.
Has domicile been abolished for inheritance tax?
Yes. Domicile was abolished as the test for UK inheritance tax on 6 April 2025 and replaced by a long-term UK residence test in section 6A of the Inheritance Tax Act 1984, inserted by Finance Act 2025, Schedule 13. Deemed domicile, the old 15-of-20 rule, was abolished for inheritance tax on the same date.
What is a long-term UK resident for inheritance tax?
A person who was UK resident in at least 10 of the 20 tax years immediately before the tax year in which a chargeable event occurs, including the tax year of death. A long-term UK resident's worldwide estate falls within UK inheritance tax. A person who is not a long-term UK resident is within the charge only on UK-situated assets, which are in scope whatever their residence history.
How many years do I need to be non-resident to escape UK inheritance tax on my worldwide estate?
Between 3 and 10 consecutive tax years, depending on how many of your final 20 tax years you were UK resident. Ten to 13 years of residence gives a 3-year tail. Twenty years of residence gives a 10-year tail. UK assets never leave the charge.
What is the UK inheritance tax tail?
The period after you leave the UK during which your worldwide estate remains within UK inheritance tax. It runs from 3 years to 10 years, set by how many of the 20 tax years ending with your last resident year you were UK resident. After 10 consecutive non-resident years the clock resets entirely.
Are my UK assets still subject to inheritance tax if I am non-resident?
Yes. Only property situated outside the UK can be excluded property. UK residential and commercial property, UK bank accounts, ISAs, UK-incorporated shares and, from 6 April 2027, UK-registered pensions remain within UK inheritance tax regardless of how long you have lived abroad.
Is UK property always subject to UK inheritance tax?
Yes, including UK residential property held through an offshore company or other structure. Schedule A1 IHTA 1984 remains in force and was re-cut onto a residence basis by Finance Act 2025. Removing the structure does not remove the property from charge.
Can I claim the residence nil-rate band if I live abroad?
Yes, where a UK residence passes to direct descendants such as children or grandchildren. The £175,000 band is not conditional on your own residence. It tapers by £1 for every £2 by which the net estate exceeds £2,000,000, and is lost entirely at £2,350,000.
Does the 7-year gift rule apply if I live abroad?
Yes. Gifts are potentially exempt transfers on the same terms. Taper relief applies only to gifts made 3 to 7 years before death, and it reduces the tax on the gift, not the value of the gift. If the gift sits within the nil-rate band there is no tax to taper, so taper relief gives no benefit.
What happens to my pension for inheritance tax from April 2027?
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits fall within the estate for inheritance tax under Finance Act 2026, sections 66 to 71. Death-in-service benefits and dependants' scheme pensions stay outside the charge, and the spouse exemption is preserved.
What is the 36% reduced inheritance tax rate?
Where 10% or more of the net value of an estate passes to charity, the rate on the rest of the chargeable estate falls from 40% to 36%. Because the reduced rate applies to the whole chargeable estate, the net cost to beneficiaries of reaching the 10% threshold is considerably less than 10%.
I was deemed domiciled on 30 October 2024. What happens to me?
If you were treated as deemed domiciled on 30 October 2024, a transitional rule may apply to you, and it can limit the period for which a worldwide estate stays in scope to 3 years rather than the sliding scale that otherwise applies. Which regime governs the position depends on the detail of the residence history.
Sources
Every figure and date in this guide is drawn from primary legislation or HMRC's own published guidance. The sources are listed so that you can check them.
Inheritance Tax Act 1984, section 6A: long-term UK residence
Inheritance Tax Act 1984, section 18: transfers between spouses
Inheritance Tax Act 1984, sections 267ZC to 267ZE: election to be treated as a long-term UK resident
Inheritance Tax Act 1984, Schedule A1: UK residential property interests
Finance Act 2025, inheritance tax provisions and Schedule 13
Finance Act 2026 (c. 11), sections 66 to 71: pension interests (Royal Assent 18 March 2026)
Finance Act 2026, section 71: commencement, deaths on or after 6 April 2027
HMRC IHTM47051: settled property and the pre-30 October 2024 protection
GOV.UK: Inheritance Tax rates and allowances (updated 26 November 2025)
Where to go from here
The 10-of-20 test is countable, and so is the tail. Most expatriates can work out which row of the table they sit on with a calendar and an hour. What is harder is the second question: what you own in the UK, what it is worth, and what the estate looks like once a pension joins it in April 2027.
Our team works exclusively with people living outside the United Kingdom, across estate and inheritance tax planning, pensions and retirement, currency, protection, and cross-border matters for US persons.
Written by a Senior Partner & Financial Adviser, Paratus Wealth. Paratus Wealth provides cross-border financial planning for expatriates worldwide.
enquiries@paratus-wealth.com
Last reviewed: 14 July 2026. Legislation and thresholds are stated as at this date.
Important information
This guide is provided for information and education only. It is a general explanation of UK inheritance tax legislation as it stands at the date of publication. It does not constitute financial, tax or legal advice, nor a personal recommendation, and it does not take account of your individual circumstances. No action should be taken on the basis of it alone. Tax treatment depends on individual circumstances and may change in the future. The rules described here interact with the law of your country of residence, which is not covered in this guide. You should seek advice appropriate to your own circumstances before making any decision.
Paratus Wealth provides services to individuals resident outside the United Kingdom. We are not able to act for you once you are UK resident. This guide is not directed at, and is not intended for use by, residents of the United Kingdom.
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