Moving Abroad and Domicile Status
How residence and domicile status affect your UK inheritance tax liability
Inheritance Tax (IHT) has moved from a domicile-based to a residence-based system. If you are a long-term UK resident (see below), your non-UK (overseas) assets may be within scope for IHT on lifetime transfers and on death. References to "deemed domicile (15/20)" apply only to events before 6 April 2025.
Key Takeaways
- • From 6 April 2025, IHT scope depends on residence, not domicile
- • Long-term UK residents (10 of 20 years) face IHT on worldwide assets
- • UK assets always subject to inheritance tax regardless of residence
- • Legacy domicile rules still apply to events before 6 April 2025
Scope now depends on residence (not common-law domicile)
From 6 April 2025, IHT looks at whether you are a long-term UK resident at the time of the chargeable event (including death). UK-situated assets remain within scope for everyone. Non-UK assets are within scope where you meet the long-term residence test.
You are a long-term UK resident if you have been UK resident in at least 10 of the previous 20 tax years immediately before the relevant event. Residence is determined under the Statutory Residence Test (SRT).
If you leave the UK, the period you remain in scope after departure is shortened where your UK residence history is between 10 and 19 years.
Understanding Domicile vs Residence
Many people confuse residence with domicile, but they are completely different concepts for inheritance tax purposes. Your residence status affects income tax and capital gains tax, while domicile determines inheritance tax liability.
Based on where you spend your time and have ties. Determined by statutory residence test.
Your permanent home - the country you consider your natural home and intend to return to.
Scope was based on domicile and deemed domicile (15/20). Those rules still apply to events before 6 April 2025. Do not mix legacy outcomes with the current residence-based test.
Types of Domicile
UK law recognizes three types of domicile, each with different implications for inheritance tax:
Acquired at birth, usually following your father's domicile. This is your default domicile and can be revived if you abandon a domicile of choice.
Example: Born in London to UK-domiciled parents = UK domicile of origin
Acquired by moving to a new country with the intention of making it your permanent home. Requires both residence and clear intention to remain permanently.
Example: UK citizen emigrates to Australia, sells UK property, obtains Australian citizenship
Applies to those under 16, who take their father's domicile (or mother's if father deceased). Changes automatically when the parent's domicile changes.
Example: Child moves with UK-domiciled parents to France - child becomes French domiciled
Deemed Domicile Rules
Even if you're not actually UK domiciled, you may be treated as deemed domiciled for inheritance tax purposes. This anti-avoidance rule prevents people from claiming non-domiciled status while maintaining strong UK ties.
15 out of 20 Years Rule
You become deemed domiciled if you've been UK resident for at least 15 of the 20 tax years ending with the current year.
Formerly Domiciled Rule
If you were UK domiciled within the last 3 years, you remain deemed domiciled for inheritance tax.
Tax Liability by Residence Status (from 6 April 2025)
Your residence status determines which assets are subject to UK inheritance tax:
Trusts (excluded property after April 2025)
From 6 April 2025, whether non-UK trust property is excluded depends on whether the settlor is long-term UK resident at the relevant time. When the settlor is long-term resident, non-UK trust assets can be within IHT; when the settlor is not, they can be excluded property. Transitional rules may affect 10-year/exit charges and gifts with reservation.
- • Long-term UK resident dies owning a non-UK portfolio: the overseas assets can be within IHT scope (subject to reliefs/exemptions).
- • Individual resident for 6/20 years dies with non-UK assets: likely outside scope for those non-UK assets (UK-situated assets still in scope).
- • Settlor of a non-UK trust becomes long-term resident: non-UK trust assets can be within IHT for relevant charges while they remain long-term resident.
Planning Before Long-term Residence
If you're approaching the 10-year threshold, there are legitimate planning opportunities to consider:
- • Offshore trusts: Establish trusts while not long-term resident to protect overseas assets
- • Asset restructuring: Move investments offshore before becoming long-term resident
- • Excluded property trusts: Certain trust structures can maintain excluded property status
- • Timing of gifts: Make significant gifts while not long-term resident to start 7-year clock
- • Residence breaks: Consider temporary non-residence to manage the 10-year threshold
Double Taxation Relief
If you're liable for inheritance tax in both the UK and another country, double taxation agreements may provide relief. The UK has agreements with many countries to prevent the same assets being taxed twice.
Practical Considerations
When planning around residence status, consider these practical factors that can affect your position:
- • Selling UK property
- • Obtaining foreign citizenship
- • Moving pension arrangements
- • Changing will to foreign law
- • Joining local clubs/societies
- • Children's schooling arrangements
- • Retaining UK property
- • Maintaining UK bank accounts
- • Regular UK visits
- • UK-based family ties
- • Temporary work assignments
- • Plans to return to UK