Inheritance tax, protecting your legacy

On 6 April 2025, one of the most far-reaching changes to UK inheritance tax in several generations came into force. The concept of domicile, which for decades had determined whether your worldwide assets were exposed to UK inheritance tax, was abolished. For internationally mobile individuals and long-term expats, this changes everything. Assets that were previously outside the reach of HMRC at death may no longer be.

Understanding your allowances and making the most of what is available remains the essential starting point for any plan, but the first question now is whether you are caught by the new rules.
The concept of domicile has now been replaced with a residence-based test. This means your worldwide estate is now subject to UK inheritance tax solely on the basis of how long you have lived in the UK.

For many former long-term UK residents who had assumed their overseas wealth was beyond HMRC’s reach, this is a fundamental change. It is worth reviewing your position carefully, and sooner rather than later.

Leaving the UK does not immediately end your exposure

One of the aspects of the new regime that surprises people most is that simply leaving the UK does not immediately remove your worldwide estate from the scope of inheritance tax. If you were a long-term resident when you departed, a trailing period of exposure continues after you leave; the length depends on how many years you were a UK resident. This can extend for up to ten years after departure. It is an area where planning ahead, ideally before you leave, can make a significant difference.

Your allowances and what you can do with them

Whatever your residence position, making the most of the allowances available to you is always the right starting point. Beyond the nil-rate bands, lifetime gifting remains one of the most effective and straightforward planning tools available. Tax-efficient gifting can protect large parts of your estate from IHT.
Smaller amounts can be given away each year, free of any inheritance tax consideration. And gifts made from regular surplus income – rather than capital – can also be outside the scope of IHT if structured correctly. These are not complicated arrangements. They are simply a matter of knowing what is available and using it in an organised way. The detail is in the timing of the gifts; it matters over many years.

How we can help

Inheritance tax planning is not something that needs to be left until later in life, and for expats and internationally mobile individuals, the recent rule changes mean that an immediate review could prevent considerable exposure. We work with clients to understand their current position under the new residence-based regime, identify the allowances and reliefs available to them, and put in place a plan that protects as much of their estate as possible for the people they want to benefit.

If you are not sure whether the new rules place you at unexpected risk, get in touch, and we will give you a clear picture of your position.