The UK moved from a domicile-based to a residence-based inheritance tax regime in April 2025. It was the largest change to the tax in a generation, and a great deal of pre-2025 planning is now either redundant or actively harmful.
The new test in one paragraph
You are a "long-term resident" — and therefore within scope of UK inheritance tax on your worldwide estate — once you have been UK-resident for at least ten of the previous twenty tax years. Leave the UK and the exposure does not end immediately: a tail of up to ten years applies, scaling with how long you were resident. Non-residents outside that test remain exposed on UK-situs assets only, and UK residential property remains within scope however it is held.
What broke
Excluded property trusts. The old certainty — settle before acquiring a deemed domicile and the trust is outside the net permanently — no longer holds. Trust property now moves in and out of relevant property charges as the settlor's long-term-resident status changes. Existing trusts need re-testing; several will face ten-year and exit charges that were not in anyone's plan.
Domicile-based arguments. Evidence of foreign domicile — a foreign burial plot, a retained overseas home — no longer determines the outcome. Day counts do.
Arrive-and-forget planning. The ten-year clock runs quietly. Families who arrived in 2017 crossed the line in 2027 without a single letter arriving to tell them.
What still works
- Timing of arrival and departure. The test is mechanical, which cuts both ways. Departure dates, split-year treatment and the tail calculation can be planned with precision.
- Lifetime giving. Potentially exempt transfers survive, with the seven-year taper. Regular gifts out of surplus income remain one of the most under-used reliefs in the code, and require a contemporaneous record of income and expenditure to withstand challenge.
- Business and agricultural relief, subject to the reforms announced for 2026 that cap full relief and apply a reduced rate above the cap. Trading status testing matters more than ever.
- Life assurance in trust. Where liability is unavoidable, whole-of-life cover written in trust converts an illiquid tax bill into a funded one. Underwriting gets harder every year you wait.
- Spousal planning, including the transferable nil-rate band, and the rules where one spouse is not long-term resident.
The forgotten half: succession law
Tax is only one system. Forced heirship in France, Spain and much of the Gulf, and Sharia succession in several jurisdictions, can override a will regardless of what it says. The EU Succession Regulation allows an election for the law of nationality in participating states — but the election must be made expressly in the will, and it does not change tax outcomes, only who inherits.
Families with assets in three or more countries usually need coordinated wills, drafted so that each is limited to its own jurisdiction's assets and none revokes the others. We have seen more distress caused by two wills that revoked each other than by any tax charge.
A practical sequence
- Count the days — establish long-term-resident status and the date it changes.
- Map assets by situs and by the law governing their succession.
- Re-test every existing trust against the post-2025 rules.
- Fix the wills and the powers of attorney.
- Quantify the residual liability, then decide whether to give, insure or accept it.
Most families find the residual number is smaller than they feared and the paperwork risk larger. Both are fixable — but only while everyone concerned still has capacity and the ability to travel.
