Inheritance tax is now residence-based: are you a long-term resident?
The April 2025 reforms are usually discussed in terms of income tax and capital gains. But the change to inheritance tax may prove more consequential for families, and it has had noticeably less attention.
From 6 April 2025, whether your worldwide estate falls within the UK inheritance tax net no longer depends on your domicile. It depends on how long you have been resident in the UK.
The long-term resident test
You become a long-term resident once you have been UK resident for ten out of the previous twenty tax years. Residence is determined by the same Statutory Residence Test used for income tax and capital gains tax.
The consequences are straightforward to state: UK assets are always within the scope of inheritance tax, as before; non-UK assets are within scope only if you are a long-term resident.
Alongside this, deemed domicile has been abolished, as has the concept of the formerly domiciled resident — someone born in the UK with a UK domicile of origin who later acquired a domicile of choice elsewhere.
Leaving does not end it immediately
This is the part that catches people out. When a long-term resident leaves the UK, their worldwide assets stay within the inheritance tax net for a period afterwards — often described as the 'tail'.
The tail is a minimum of three years for someone who was resident for 10 to 13 of the last 20 tax years, and it increases by one year for each additional year of residence, up to a maximum of ten years.
So a person who has lived in the UK for two decades cannot simply move abroad and step outside the UK inheritance tax net. They remain exposed for a further ten years. For anyone contemplating a departure for estate-planning reasons, the arithmetic now needs to start much earlier.
Spouses
A spouse or civil partner who is not a long-term resident can elect to be treated as one. The election now lasts until they have been non-UK resident for ten consecutive tax years, up from four under the previous rules — a considerably longer commitment than before.
The practical upshot
The old system rewarded arguments about intention and permanence: where you truly considered your home to be. Domicile disputes with HMRC were notoriously fact-heavy and subjective.
The new system replaces that with something far more mechanical — and therefore far more predictable. But predictability cuts both ways. Where domicile could be argued, residence is simply counted. If you have been here ten years out of twenty, you are a long-term resident, whatever your intentions.
That makes three things important. Know your residence history, because your exposure now turns on a twenty-year look-back and records matter. Review existing structures, as trusts and arrangements established on domicile-based assumptions may no longer do what they were set up to do. And plan departures early, because the tail means leaving the UK is a process measured in years, not a single moment.
This article is general information, not advice. Inheritance tax planning is highly fact-specific, and the transitional rules are complex. Please get in touch to discuss your circumstances.
