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Yes. Non-residents always pay UK inheritance tax (IHT) on UK-situated assets like property, shares, and bank accounts. From 6 April 2025, non-residents also pay UK IHT on worldwide assets if they qualify as a long-term UK resident, meaning UK tax resident for at least 10 of the previous 20 tax years. An IHT tail of 3 to 10 years continues after leaving the UK.
If you left the UK years ago and assumed your overseas assets were safely out of HMRC’s reach, the ground has shifted under your feet. On 6 April 2025, the UK scrapped the domicile system that had governed inheritance tax for over 150 years. In its place: a residence-based test that catches more people, for longer, with fewer escape routes.
This guide is for non-residents with UK ties of any kind. Expats who left the UK in the last decade. Foreign nationals who own a London flat or hold UK shares. British citizens living abroad who still receive HMRC correspondence. The rules that applied to you in March 2025 may have nothing to do with what applies now.
Three things now decide whether your estate pays UK inheritance tax:
Whether you qualify as a long-term UK resident (the new 10-of-20 test)
How long your IHT tail runs after you leave
Whether you hold UK-situs assets (always in scope regardless of residence)
We’ll work through each one, then cover the trust changes, the spouse rules, the 2027 pension shock most people haven’t heard about, and what to actually do next.
Already know you need professional advice? Speak to the IBISS & CO IHT planning team for a confidential review of your international estate position.
What Changed on 6 April 2025
For the last century-plus, UK inheritance tax hinged on a slippery legal concept called domicile. Domicile was about where your “permanent home” was, where you intended to die, and which country you considered home for life. It was vague, expensive to argue, and easy to game.
The system worked like this. If you were UK domiciled (or “deemed domiciled” after 15 of 20 tax years in the UK), HMRC taxed your worldwide estate. If you were non-dom, HMRC only taxed your UK assets. People left the UK, claimed a foreign domicile of choice, and shielded huge offshore estates from IHT.
That system is gone. From 6 April 2025, the test is simpler and harsher: have you been UK tax resident for at least 10 of the last 20 tax years? If yes, you’re a long-term UK resident and your worldwide estate is in scope. If no, only your UK assets are taxed.
| Feature | Old Rules (pre-6 April 2025) | New Rules (from 6 April 2025) |
|---|---|---|
| Basis of IHT liability | Domicile / deemed domicile | Long-term UK residence (LTR) |
| Threshold for worldwide IHT | 15 of 20 tax years (deemed dom) | 10 of 20 tax years (LTR) |
| Tail after leaving UK | 0 or 3 years | 3 to 10 years (sliding scale) |
| Excluded property trust status | Fixed at settlement | Depends on settlor’s LTR status at each chargeable event |
| Spouse exemption cap | £325,000 to non-dom spouse | £325,000 to non-LTR spouse |
HMRC’s full technical guidance is on GOV.UK at Inheritance Tax if you’re a long-term UK resident. Domicile still matters for family law and succession rules, but for tax it’s been retired.
Are You Caught by UK IHT as a Non Resident? The 10 of 20 Test
The new rule is one sentence: you’re a long-term UK resident in a given tax year if you’ve been UK tax resident in at least 10 of the previous 20 tax years.
Three things to flag before you start counting.
Tax years, not calendar years
The UK tax year runs 6 April to 5 April. A year you spent half in the UK and half abroad might count or might not, depending on the Statutory Residence Test.
Years don’t have to be consecutive
Lived in the UK 2005–2010, left for India, came back 2018–2023, then moved to Dubai? That’s 11 years across the 20-year window. You’re a long-term resident.
Split years count as full years
If you arrived in the UK partway through a tax year and got split-year treatment, the whole year counts toward your 10. You can hit long-term resident status faster than you expect.
For anyone under 20, there’s a modified rule: you’re a long-term resident if you’ve been UK tax resident in at least half the tax years since your birth.
If you’re close to the 10-year threshold or trying to plan your exit, see our companion guide on the 10-year non-residence test, which walks through the residence-counting mechanics in detail.
when does Sara become a long-term resident?
Sara moved to London from Lahore in August 2018. She got split-year treatment for 2018/19 and was UK tax resident every year after. She left the UK in May 2025 and moved back to Pakistan.
Counting tax years: 2018/19, 2019/20, 2020/21, 2021/22, 2022/23, 2023/24, 2024/25. That’s seven tax years of UK residence. She’s not yet a long-term resident, so when she leaves in 2025, only her UK assets fall within UK IHT going forward.
If Sara had stayed three more tax years, the picture flips entirely. Her worldwide estate would be caught, and she’d carry a three-year tail when she eventually left.
The IHT Tail How Long UK IHT Follows You After Leaving
Here’s where the new system bites harder than the old one. Becoming non-resident doesn’t immediately remove you from UK IHT. You drag a tail of continued exposure behind you, and its length depends on how long you lived in the UK.
| Years of UK Residence (Last 20) | IHT Tail After Leaving the UK |
|---|---|
| 10–13 years | 3 tax years |
| 14 years | 4 tax years |
| 15 years | 5 tax years |
| 16 years | 6 tax years |
| 17 years | 7 tax years |
| 18 years | 8 tax years |
| 19 years | 9 tax years |
| 20+ years | 10 tax years (maximum) |
The rule minimum three years, plus one extra year for every year of UK residence above 13, capped at 10 years. A long-term resident remains fully within UK IHT scope until they’ve been non-UK tax resident for between three and 10 consecutive tax years.
Why this matters more than people think
Under the old system, a non-dom could leave the UK and immediately knock their overseas assets out of UK IHT. The deemed-dom rules carried a three-year tail, but only for people who’d been UK resident for 15+ of the prior 20 years. Many non-doms had no tail at all.
The new system extends tail exposure to far more people. If you lived in the UK for 20 years, retired to Monaco in May 2025, and die in 2032, your worldwide estate is still taxed at 40% by HMRC. You have to wait until 2035 to clear the tail.
The tail resets after 10 consecutive tax years of non-residence. For a deeper walkthrough of how the tail interacts with offshore trusts and exit charges, see our guide to the IHT tail and excluded property trusts.
UK Assets Are Always in Scope Even for Non Residents
This part hasn’t changed and catches people every time. UK-situs assets are always subject to UK IHT. It doesn’t matter where you live or how long ago you left. If the asset is located in the UK at the time of death or transfer, HMRC taxes it.
UK situs assets include:
- UK residential property (your London flat, that Manchester buy-to-let)
- UK commercial property
- Shares in UK companies
- UK bank and building society accounts
- UK government bonds (gilts)
- Cash physically located in the UK
- Business interests with UK assets
- UK-registered intellectual property
The trap people fall into
Indirect interests in UK residential property. If you own a UK home through an offshore company, an offshore trust, or a partnership, HMRC pierces through the wrapper. The underlying UK property is still caught. This rule was tightened in 2017 specifically to stop offshore-company structures from sheltering UK homes, and it survived the 2025 reforms intact.
If you’re a non-resident considering UK property purchases, our guide to investing in the UK as a non-resident covers the IHT, SDLT, and CGT angles together.
If you hold UK property, pensions, or business interests as a non-resident, your IHT exposure under the new rules may be higher than you think. Book a confidential consultation with IBISS & CO international tax team to model your position.
Who Can Still Use the Old System
A narrow group of people get to keep playing under the old rulebook. You qualify for transitional protection only if both of these are true:
- You are non-UK resident in the 2025/26 tax year.
- You were not UK domiciled under common law on 30 October 2024 (Budget Day)
If both apply, your IHT status is determined under the pre-6 April 2025 tests. If you wouldn’t have been deemed-domiciled on 6 April 2025 (you weren’t resident in 15 or more of the previous 20 tax years), you have no IHT tail.
If you would have been deemed-domiciled on 6 April 2025, the old three-year tail applies regardless of how many years you’d been resident.
This protection is fragile. Return to the UK in any future tax year and you fall into the new system. The 10-of-20 test then counts your historic UK residence, so you could become a long-term resident immediately.
If you’re a former non-dom assessing your transitional position, our non-dom FIG regime survival guide covers how the income tax, CGT, and IHT transitional rules interact.
Spouse Exemption Changes for Non Resident Couples
The old £325,000 cap on transfers to a non-dom spouse is gone. The new rule looks at long-term resident status of both partners.
| Couple’s Residence Status | Spouse Exemption Available |
|---|---|
| Both spouses are long-term UK residents | Unlimited |
| Neither spouse is a long-term resident | Unlimited |
| Transfer from non-LTR spouse to LTR spouse | Unlimited |
| Transfer from LTR spouse to non-LTR spouse | Capped at £325,000 |
The capped scenario is the one that hurts. If a UK-resident long-term-resident dies and leaves their estate to a spouse who lives abroad, the exemption is restricted to the £325,000 nil-rate band. On amounts above that, IHT applies at 40%.
There’s a workaround. The non-LTR spouse can elect to be treated as a long-term resident. This unlocks the full exemption but locks them into UK IHT on their worldwide assets, and the election lasts until they’ve been non-UK resident for 10 consecutive tax years. That’s a much bigger commitment than the old four-year election under the deemed-dom regime.
Trusts Holding Non-UK Assets
The trust rules are the most complicated piece of the reform, and arguably the most punishing for long-term planning.
Under the old system, if you settled a trust while non-UK domiciled, the non-UK assets in that trust were excluded property forever. The protection was fixed at the moment of settlement. Even if you later became UK domiciled, the trust assets stayed outside UK IHT.
That permanence is dead. From 6 April 2025, excluded property status depends on the settlor’s long-term resident status at the time of each chargeable event. The trust comes in and out of UK IHT based on where the settlor is at the relevant moment.
Trust assets are in scope. Expect 6% relevant-property charges every 10 years, plus exit charges, plus potential 40% on death.
Non-UK assets stay excluded.
There’s partial transitional protection for trusts settled before 30 October 2024. These trusts may avoid gift-with-reservation rules on the settlor’s death. But they don’t escape the 10-year periodic charges if the settlor becomes a long-term resident again.
A subtle trap most people miss: when the IHT tail ends and your trust assets finally drop out of UK IHT scope, that exit triggers a deemed disposal. The trust can face an immediate exit charge of up to 6% of asset value. You think you’ve escaped, and you get a tax bill on the way out the door.
Double Tax Treaties Still Relevant, Mostly Unchanged
The UK has IHT-specific treaties with 10 countries: France, India, Italy, Ireland, Netherlands, Pakistan, South Africa, Sweden, Switzerland, and the USA. These treaties use domicile-style tie-breakers to decide which country has primary taxing rights.
None have been formally updated for the new long-term resident regime. HMRC’s working position is that treaty references to “domicile” should be read in the spirit of the new residence rules, but this isn’t tested in tribunal yet. If you’re caught by both UK IHT and a foreign equivalent, the treaty position needs specific advice. Don’t assume the old answers still hold.
The treaty list also doesn’t cover most countries. If you’re an expat in Spain, Portugal, Australia, the UAE, or anywhere outside the 10 treaty countries, you’ll rely on unilateral relief credits, which are messier and less generous.
The 2027 Pensions Change Every Non Resident Needs to Know
Most non-residents reading IHT guidance have one assumption baked in: UK pensions sit outside the estate. That’s been true for decades. Defined-contribution pots and discretionary death benefits passed to beneficiaries tax-free, which made pensions the most efficient way to move wealth across generations. That ends on 6 April 2027.
From 6 April 2027, the government will bring most unused pension funds and death benefits into scope of Inheritance Tax. The full HMRC notice is at GOV.UK Inheritance Tax: unused pension funds and death benefits. Defined-contribution pots, drawdown funds, and most lump-sum death benefits will all be added to the deceased’s estate. If your estate exceeds the nil-rate band, 40% applies on the excess, including the pension.
A few exclusions survive:
- Death-in-service benefits stay outside the estate
- Dependants’ scheme pensions (ongoing payments to spouse, civil partner, children, financial dependants)
- Joint-life annuities purchased alongside the member’s lifetime annuity
- Transfers to a surviving spouse who is a long-term UK resident. Note that last condition
That last point catches expat couples. If you die after 2027 with a UK pension and your spouse is not a long-term UK resident, the spouse exemption is restricted. The pension counts as part of your estate, the exemption to a non-LTR spouse is capped at £325,000, and the rest can be taxed at 40%.
The government estimates around 10,500 additional estates per year will pay IHT they wouldn’t have under the old rules. Average bill: roughly £34,000. If you have a six- or seven-figure UK pension and you’re planning to leave it untouched as a legacy asset, that strategy is broken. For non-residents specifically:
- Audit your UK pension nominations before April 2027
- Reconsider whether to draw down UK pensions during your lifetime
- Check whether your spouse’s long-term resident status will affect exemptions
- Consider transferring out to a QROPS where it makes sense (highly fact-specific)
Reliefs and Allowances Still Available
Non-residents still get the full set of UK IHT allowances on UK-situs assets:
- Nil-rate band: £325,000 per person, frozen until April 2030
- Residence nil-rate band: up to £175,000 extra if you leave a qualifying UK home to direct descendants
- Transferable allowances: unused nil-rate band passes to a surviving spouse
- Business Property Relief: up to 100% on qualifying UK business interests
- Agricultural Property Relief: up to 100% on qualifying UK farmland
A married couple leaving a UK home to children can theoretically shield £1 million between them. The residence nil-rate band tapers above a £2 million estate and disappears entirely above £2.35 million, so very large estates lose this allowance.
What Non-Residents Should Do Now
- Count your UK residence years. Pull together evidence of your UK tax residence status for the last 20 tax years. The Statutory Residence Test applies from 2013 onwards; before that, the old common-law tests apply.
- Audit your UK-situs assets. List every UK property, share, bank account, and business interest. These are always in scope.
- Review trusts where you’re settlor, trustee, or beneficiary. Trusts settled before 30 October 2024 have partial protection. After that date, no protection.
- Check pension nominations before April 2027. Make sure beneficiaries are documented and expression-of-wish forms are current.
- Look at your spouse’s long-term resident status. The £325,000 spouse cap reapplies for mismatched-status couples. The LTR election is available but commits to UK IHT on worldwide assets.
- Get specialist advice if your estate exceeds the nil-rate bands. The interaction between long-term residence, the tail, treaties, and the 2027 pension change is complicated. Generic estate planning advice from before April 2025 is dangerous.
UK Inheritance Tax for Non Residents FAQs
Do non-residents pay UK inheritance tax?
Yes, on UK-situated assets. Non-residents always pay UK IHT on UK property, UK shares, UK bank accounts, and other UK-located assets. On non-UK assets, non-residents only pay UK IHT if they qualify as a long-term UK resident (10 of the last 20 tax years) or are still within their IHT tail after leaving the UK.
Does UK inheritance tax apply to non-residents on overseas assets?
Only if you’re a long-term UK resident or within your IHT tail. If you’ve been non-UK resident for the relevant tail period (3 to 10 years depending on prior UK residence) and you weren’t UK resident in 10 of the last 20 tax years before that, your overseas assets are outside UK IHT.
What replaced non-dom status for IHT?
Long-term UK resident status. From 6 April 2025, the deemed-domicile rule (UK resident for 15 of 20 tax years) was replaced by the long-term resident test (UK resident for 10 of 20 tax years). Domicile is no longer relevant for IHT purposes, though it still matters for family law and succession.
How long does UK IHT follow you after leaving the UK?
Between 3 and 10 tax years, depending on how long you were UK resident before leaving. If you were UK resident for 10–13 years, the tail is 3 years. The tail increases by one year for each additional year of UK residence, up to a maximum of 10 years for those resident for 20 years or more.
Is UK inheritance tax charged on the estate or the beneficiary?
The estate. UK IHT is paid by the personal representatives (executors or administrators) out of the deceased’s estate before assets are distributed. Beneficiaries don’t typically pay IHT on what they receive, though some lifetime gifts and trust distributions can create separate IHT charges.
What is the UK inheritance tax rate for non-residents?
40% on the amount above the nil-rate band, with the same allowances available as for UK residents. The first £325,000 is at 0%, and a further £175,000 residence nil-rate band may apply if a qualifying UK home is left to direct descendants. The rate drops to 36% where at least 10% of the net estate goes to a UK charity.
Can I avoid UK inheritance tax by leaving the UK?
Not immediately and not always. Leaving the UK triggers the IHT tail, which keeps you in scope for 3 to 10 years. UK-situs assets remain in scope forever, regardless of where you live. Lifetime gifting (the seven-year rule) and trust planning can reduce exposure but need careful structuring.
Are UK pensions subject to inheritance tax for non-residents?
From 6 April 2027, yes. Most unused UK pension funds and death benefits will be included in the deceased’s estate for IHT purposes. Non-resident pension holders are affected the same way as UK residents. Death-in-service benefits and dependants’ scheme pensions remain excluded. Transfers to a long-term-resident spouse are exempt.
Need a Review of Your IHT Exposure Under the New Rules?
The shift from domicile to long-term residence has reshaped UK inheritance tax for international families. If you’re an expat, a non-resident with UK assets, or a returning Brit, your estate plan needs updating against the new framework before the 2027 pension changes land.
The IBISS & CO international tax team works with clients across the world on cross-border estate planning, trust structuring, and pension transfers. We’ll model your IHT exposure under the new rules, audit your trusts and pension nominations, and identify planning opportunities specific to your residence history.
