The April 2025 reforms to the UK's non-domicile tax regime are most widely discussed in the context of the income and CGT changes — the abolition of the remittance basis and the introduction of the Foreign Income and Gains regime. But the IHT changes are, in many respects, more far-reaching and more immediately impactful for internationally mobile families with significant wealth.
This guide focuses specifically on the IHT dimension: what the new long-term residence test means, who is caught by it, what the departure tail looks like, what planning still works, and what needs urgent reconsideration.
The Fundamental Change: Residence, Not Domicile
Under the pre-April 2025 rules, UK IHT on worldwide assets was linked to domicile — specifically, to whether you were UK-domiciled or had become "deemed domiciled" (UK-resident in 15 of the previous 20 tax years, the test introduced by the 2017 changes). Domicile is a legal concept based on intention — your permanent home, as a matter of law.
From 6 April 2025, the primary IHT test for internationally mobile individuals is the long-term residence (LTR) test — a purely mechanical, objective count of UK tax years of residence.
The LTR test: An individual is a long-term resident if they have been UK tax-resident (under the Statutory Residence Test) in at least 10 of the 20 tax years immediately preceding the relevant tax year.
If you meet this test, you are subject to UK IHT on your worldwide assets — not just your UK-situs assets. Non-UK property, overseas bank accounts, foreign investment portfolios, and overseas business interests all fall into the UK IHT net.
Who Is Newly Caught
The old deemed domicile threshold was 15 of the previous 20 tax years (the test that applied under the 2017 rules). The new LTR threshold is 10 years. This represents a dramatic reduction in the grace period for internationally mobile individuals.
Individuals who had structured their affairs on the assumption that they would never reach deemed domicile — perhaps planning to leave the UK before 15 years — now find that a shorter period of UK residence (10 years) triggers worldwide IHT exposure. There was no grandfathering, no transitional relief, and no phase-in: individuals who crossed the 10-year threshold before April 2025 became LTRs on 6 April 2025.
For example: a non-UK domiciled individual from Hong Kong who came to the UK in 2014 for work and has remained since has been UK-resident for 11 tax years by April 2025. Under the old rules, they were not yet deemed domiciled. Under the new rules, they are an LTR immediately — and their worldwide estate is subject to UK IHT from April 2025.
The Departure Tail: 10 Years
One of the most significant — and underappreciated — aspects of the new LTR regime is the departure tail.
Under the old deemed domicile rules, an individual who left the UK and ceased to be deemed domiciled was free of worldwide IHT exposure after a relatively short period — broadly three to four tax years of non-residence, depending on the precise counting.
Under the new LTR rules, an individual who leaves the UK after being an LTR remains subject to UK IHT on their worldwide assets for 10 tax years after the tax year in which their UK residence ends. This is more than three times the previous period.
For a person who leaves the UK in April 2025 (end of tax year 2024/25), worldwide IHT exposure continues until April 2035 (end of tax year 2034/35). If they die in 2033 while living in Dubai, their worldwide estate is still subject to UK IHT.
This changes the calculus around departure planning entirely. Individuals who had planned to leave the UK as part of their IHT planning need to restart that analysis. The 10-year tail means that departing in middle age — say, at 55 — does not provide IHT relief until age 65. For many individuals, that window is narrower than they anticipated.
What Still Works: IHT Planning Tools That Survive
Despite the significant changes, many IHT planning tools remain effective — some of them unchanged, some with important modifications.
Agricultural Property Relief (APR) and Business Property Relief (BPR) Qualifying agricultural land and farming businesses, and qualifying trading businesses and their shares, continue to attract IHT relief. From April 2026, the relief is restricted: the first £2.5m of qualifying assets per estate attracts 100% relief; assets above £2.5m attract 50% relief. (The cap was originally announced as £1m in the October 2024 Budget and raised to £2.5m in December 2025; it is transferable between spouses and civil partners.) This significantly reduces the IHT shelter value for large agricultural estates and high-value AIM portfolios (AIM shares have been used widely as BPR-qualifying assets in investment portfolios).
The Residence Nil-Rate Band (RNRB) The RNRB continues to apply where a residential property is passed to direct descendants. The current RNRB is £175,000 per individual (£350,000 combined for a married couple), which adds to the standard nil-rate band of £325,000. An LTR's estate can still use the RNRB on their UK main residence — there is no restriction based on LTR status.
Spousal exemption — UK to UK Transfers between spouses are fully exempt where both are UK-domiciled. LTR status does not affect this — the spousal exemption applies where both spouses are LTRs (or both are UK-domiciled), and transfers are free of IHT. However, where one spouse is non-UK domiciled and not an LTR, the restricted spousal exemption applies (currently limited to £325,000 for gifts from a UK-domiciled or LTR spouse to a non-domiciled, non-LTR spouse).
Potentially Exempt Transfers (PETs) Outright lifetime gifts to individuals start the seven-year clock. If the donor survives seven years, the gift falls outside the estate. This tool is unchanged. The key planning consideration is the LTR departure tail — gifts made during the 10-year tail are still potentially subject to UK IHT if the donor dies within seven years.
Existing Excluded Property Trusts EPTs established before April 2025, holding assets contributed before the settlor became an LTR, retain their excluded property status. These trusts continue to shelter the assets within them from UK IHT, regardless of the settlor's subsequent LTR status. The key protection is that the settlor's later LTR status does not retrospectively make already-excluded assets taxable.
New EPT contributions by LTRs New contributions to an EPT made after the settlor has become an LTR may not qualify as excluded property. The assets contributed by an LTR may fall within the relevant property regime (ten-year charges and exit charges). The distinction between assets already in the EPT (protected) and new contributions (potentially taxable) is critical. Take specialist advice before adding to an existing EPT.
What Needs Revisiting
Wills and letters of wishes: Any will or letter of wishes drafted under the pre-April 2025 rules should be reviewed. If your estate plan assumed you were outside the worldwide IHT net (because you were not yet deemed domiciled), that plan is likely incorrect now.
Offshore trust structures: Review who the settlor is, when assets were contributed, and whether post-April 2025 contributions are planned. Update trust documentation and letters of wishes as needed.
Pension nominations: Pension funds have historically sat outside the IHT net for most pension wrappers, but from 6 April 2027 unused pension funds and death benefits are brought within the estate for IHT (legislated in Finance Act 2026, with personal representatives liable). Review pension nominations in light of this change and your overall estate plan.
Business interests: If you hold qualifying business assets, the £2.5m cap on 100% BPR from April 2026 means that large business interests will no longer be fully sheltered. Reconsider the estate planning around business shareholdings.
Insurance-based IHT solutions: Whole-of-life policies written under a discretionary trust can provide a lump sum on death to meet an IHT liability without requiring asset sales. For LTRs with fixed assets (property, businesses) that cannot easily be liquidated, life insurance covering the IHT liability is a practical and cost-effective solution. The premiums paid into trust are not in the estate.
The Interaction With Non-UK Succession Taxes
LTRs with assets in multiple countries may face both UK IHT and local succession or inheritance taxes on the same assets. Double tax treaties for IHT are limited — the UK has estate tax treaties with the US, France, Netherlands, Ireland, South Africa, India, Pakistan, and a small number of others. Where a treaty does not exist, unilateral relief under IHTA 1984 s.159 provides a credit for foreign taxes on the same asset.
How Global Investments Can Help
The April 2025 IHT reforms require a root-and-branch review of estate plans for any internationally mobile individual who has been UK-resident for a substantial period or who has assets spread across multiple jurisdictions. Global Investments advises clients on the full spectrum of IHT planning — from reviewing LTR status and calculating worldwide exposure, to structuring lifetime giving, reviewing trust arrangements, and coordinating with overseas advisers on local succession tax positions. If you have not reviewed your IHT position since April 2025, please speak with one of our advisers as a matter of priority.
Frequently Asked Questions
What is the long-term residence test for IHT?
From April 2025, an individual is a long-term resident (LTR) for IHT purposes if they have been UK tax-resident in at least 10 of the 20 tax years immediately preceding the tax year in question. LTRs are subject to UK IHT on their worldwide assets, not just UK assets. This replaces the old deemed domicile test, which required 15 of 20 years.
I have been UK-resident for 11 years. Am I now a long-term resident?
Almost certainly yes, subject to the precise counting of UK tax years. If you have been UK tax-resident in 10 or more of the last 20 tax years, you are an LTR from April 2025. You were not grandfathered from the old deemed domicile position unless you had already reached deemed domicile status under the old rules (15 of 20 years), in which case there is no practical change to your IHT position.
Does Business Property Relief still work after the April 2025 reforms?
Yes, BPR and APR still apply to qualifying assets. However, from April 2026, BPR and APR relief is restricted — only the first 2.5 million pounds of qualifying assets per estate will receive 100% relief, with assets above that level receiving 50% relief. (The cap was originally announced as 1 million pounds in the October 2024 Budget and raised to 2.5 million pounds in December 2025; it is transferable between spouses and civil partners.) This significantly reduces the IHT value of large business or AIM portfolio holdings.
Can I still use an excluded property trust after April 2025?
Existing excluded property trusts (EPTs) established before April 2025, holding assets that were contributed before the settlor became an LTR, retain their excluded property status. New contributions to an EPT by an LTR settlor may not qualify as excluded property — the assets contributed after LTR status is achieved may fall within the relevant property regime. Existing assets in the EPT are generally protected.
How long after leaving the UK do I remain subject to worldwide IHT?
An individual who was an LTR and leaves the UK remains subject to UK IHT on worldwide assets for 10 tax years after the tax year in which their UK residence ceases. This is significantly longer than the old 3-year post-departure period that applied under the deemed domicile rules.
This guide is for general information only and does not constitute financial advice or a personal recommendation. The value of investments can fall as well as rise and you may get back less than you invest. Tax rules, pension legislation, and investment regulations change — always verify current rules and seek advice from a qualified independent financial adviser before making any financial decisions.