IHT Planning for Former Non-Doms Under the 2025 Regime

The tax landscape for non-UK domiciled individuals ("non-doms") changed fundamentally on 6 April 2025. The remittance basis — which allowed non-doms to shelter their foreign income and gains from UK tax by not remitting them to the UK — was abolished and replaced with a new foreign income and gains (FIG) regime. Alongside this, the inheritance tax (IHT) rules were comprehensively reformed, replacing the domicile-based IHT test with a residence-based test.

For long-term UK residents who are not UK-domiciled, these changes have profound consequences. This guide sets out the key IHT changes, the 10-year tail that now applies to long-term UK residents who leave the UK, the transitional position for existing excluded property trusts, and the planning opportunities (and their limitations) that remain.

This is a complex and evolving area of law. The legislation is contained in the Finance Act 2025, and HMRC guidance continues to be developed. Professional advice is essential — the consequences of misunderstanding these rules can be severe.

The Old Regime: Domicile-Based IHT

Before 6 April 2025, UK IHT applied to the worldwide assets of UK-domiciled individuals, and only to UK-situated assets of those who were neither domiciled nor "deemed domiciled" in the UK.

Deemed domicile arose under s267 IHTA 1984 where an individual had been UK-resident in at least 15 of the previous 20 tax years. Once deemed domiciled, the individual's worldwide assets became subject to UK IHT.

For non-doms who were not yet deemed domiciled, foreign assets could be sheltered from UK IHT by holding them in an "excluded property trust" — an offshore discretionary trust settled by a non-UK domiciled settlor, which treated the trust assets as excluded from the UK estate (and therefore outside the scope of IHT) indefinitely, regardless of any subsequent change in the settlor's domicile status.

This "excluded property" status was highly valuable. Once assets were placed in an excluded property trust by a non-dom settlor, they remained outside the UK IHT net permanently — even after the settlor became deemed domiciled.

The New Regime from 6 April 2025

The FIG Regime

The foreign income and gains (FIG) regime replaces the remittance basis. New arrivals to the UK (those who have not been UK-resident in the 10 tax years before their arrival) qualify for a 4-year FIG period during which UK-arising income and gains on foreign assets are not charged to UK tax, regardless of whether they are remitted. After the 4-year FIG period, all income and gains (worldwide) are taxable in the UK.

The New IHT Test: Long-Term UK Residence

The IHT domicile test has been replaced by a long-term UK residence (LTUK) test. An individual is within the scope of worldwide IHT if they:

• Are UK-resident in the current tax year, and
• Have been UK-resident for at least 10 of the previous 20 tax years.

Individuals who meet the LTUK test are charged to UK IHT on their worldwide assets, just as UK-domiciled individuals were under the old regime.

Individuals who do not meet the LTUK test — including recent arrivals — are charged to UK IHT only on UK-sited assets.

The 10-Year Tail

The most significant new feature for long-term UK residents who leave the UK is the 10-year tail. Under the old regime, a non-dom who left the UK and lost deemed domicile status could, after a period of absence, remove their worldwide assets from the IHT net relatively quickly. Under the new regime:

An individual who has met the LTUK test (been UK-resident for at least 10 of the previous 20 tax years) continues to be treated as a long-term UK resident — and therefore subject to worldwide IHT — for 10 further tax years after ceasing UK residence.

The 10-year tail is calculated as follows:

• Once an individual qualifies as an LTUK person, they remain within the worldwide IHT scope until they have been non-UK-resident for 10 consecutive tax years.
• If they return to the UK during those 10 years, the tail begins again.

This is a significant change for individuals who have lived in the UK for many years and are considering relocation. Someone who has been UK-resident for 15 years, retires to Spain, and lives there for 9 years before dying is still subject to UK IHT on their worldwide estate. Only after 10 full years of non-UK-residence does the tail end.

The Trust Protection Window: Closed

Under the old excluded property regime, a non-dom could establish an offshore discretionary trust before becoming deemed domiciled, and the trust assets would be permanently excluded from the UK IHT estate. This was the most important long-term IHT planning tool for non-doms.

The Finance Act 2025 changed this prospectively for trusts where assets were added on or after 6 April 2025. For trusts established by non-doms before 6 April 2025 using foreign assets, the excluded property status was preserved on a transitional basis for assets already in the trust. New additions of assets to existing excluded property trusts after 6 April 2025 by LTUK settlors are treated as subject to the new rules.

The planning window closed: advisers and their non-dom clients had been urged to establish excluded property trusts — and to fund them with foreign assets — before 6 April 2025 to lock in the old excluded property treatment. For those who did not act in time, the opportunity to create new excluded property trusts with perpetual IHT protection is gone.

Transitional Position for Existing Excluded Property Trusts

For excluded property trusts established before 6 April 2025 by non-UK domiciled settlors using foreign assets (and not subsequently contaminated by additions of assets or changes in structure), the transitional rules generally preserve excluded property status for those assets already in the trust.

However, the transitional rules are complex and fact-specific:

• No new additions by LTUK settlors: assets added to an existing excluded property trust on or after 6 April 2025 by a settlor who is now an LTUK person are not treated as excluded property. They fall within the IHT scope.
• Retained excluded property status for pre-April 2025 assets: assets settled in the trust before 6 April 2025 by a non-UK-domiciled settlor using foreign property generally retain their excluded property status under the transitional provisions — subject to the specific conditions in Finance Act 2025.
• Trust structure changes: changes to the trust structure after 6 April 2025 (adding new trustees, changing the trust deed, changing beneficial classes) may affect the transitional analysis. Trustees should seek specialist advice before making any changes.

If you are a trustee or settlor of a pre-2025 excluded property trust, an urgent review of the trust's structure and the transitional position is essential.

Rebasing: A One-Time Opportunity

The Finance Act 2025 included a rebasing provision for individuals who had been using the remittance basis. Under this provision, individuals who were non-UK domiciled and had used the remittance basis at any point before April 2025 are entitled to rebase the cost of qualifying foreign assets held on 5 April 2017 to their market value on that date, for CGT purposes.

This rebasing opportunity is valuable where foreign assets have grown significantly. By rebasing the cost base to the 2017 value, the pre-2017 gain is permanently excluded from UK CGT. The rebasing election must be claimed on the self-assessment return for the relevant year — it is not automatic.

There is no equivalent rebasing for IHT — the new IHT regime applies to the full market value of worldwide assets at death, without any rebasing of previously excluded assets.

Practical IHT Planning Options for Former Non-Doms

Given the new regime, the planning options for LTUK individuals are more limited than under the old domicile-based system. The following strategies remain available:

1. Life assurance: a whole-of-life policy written in trust can provide a lump sum to meet the IHT charge on death, without reducing the estate. This does not reduce the IHT liability but provides liquidity to pay it.

2. Potentially exempt transfers (PETs): outright gifts to individuals start a seven-year clock. If the donor survives seven years, the gift is exempt. Annual exemptions (£3,000 per year) and small gifts exemptions provide modest immediate relief.

3. Business property and agricultural property relief: qualifying business and agricultural assets may qualify for BPR or APR, reducing the IHT charge on those specific assets.

4. Charitable giving: gifts to UK qualifying charities are exempt from IHT. A substantial charitable bequest in a will can reduce the overall IHT charge (and reduce the rate on the remainder to 36% if charitable gifts represent 10%+ of the baseline estate).

5. Pre-departure planning: individuals considering leaving the UK should model their IHT position carefully before departing. The 10-year tail means that planning should begin well before the intended departure date. A phased departure combined with gifts during the run-up to departure (under the PET rules) may significantly reduce the tail period's IHT exposure.

6. Reviewing existing offshore trust structures: trustees of offshore discretionary trusts should carry out a full review of the transitional position to confirm which assets retain excluded property status and which do not.

IHT Rate and Threshold

The IHT rate remains 40% on the chargeable estate above the nil-rate band (£325,000 per person). The LTUK test does not change the rate — it changes only the scope of assets subject to the charge.

The residence nil-rate band (£175,000 per person for a qualifying UK residential interest passing to direct descendants) is available to LTUK individuals, provided the property meets the usual conditions.

How Global Investments Can Help

Global Investments has advised non-domiciled individuals on UK tax planning for many years. We understand the transitional complexity introduced by the 2025 reforms and advise clients on how to navigate the new IHT regime, model the 10-year tail impact, and identify remaining planning opportunities.

We work with specialist tax counsel on offshore trust reviews, pre-departure planning, and the interaction between the FIG regime, CGT rebasing, and IHT. Our advice is cross-border in nature — coordinating UK and offshore advisers to ensure a coherent and compliant plan.

Compliance caveats apply throughout: tax rules in this area are evolving, HMRC guidance is still developing, and individual circumstances vary enormously. The information in this guide is correct to the best of our knowledge as at June 2026 but should not be acted upon without current professional advice.

This guide is for general information only and does not constitute legal or tax advice. Tax rules are subject to change and individual circumstances vary significantly. You should seek professional advice tailored to your situation before taking any action. The value of investments and income from them can fall as well as rise.