If you’re living in the UK with significant international assets, the rules around inheritance tax (IHT) are changing in ways that could affect your family’s future. From April 2025, the government is shifting from a domicile-based system to one based on long-term UK residence. This means that if you’ve made the UK your home for a decade or more, your worldwide assets could be exposed to UK inheritance tax—even if you still consider yourself a citizen of another country.

Let’s break down what deemed domicile means, how the new rules work, and what you can do to protect your wealth.

The Shift: From Domicile to Residence-Based IHT

Until now, the UK’s IHT regime has relied on the concept of “domicile”—a legal status based on where you consider your permanent home. If you were non-UK domiciled, only your UK assets were subject to IHT. Your overseas property, investments, and business interests were generally safe from UK tax.

From 6 April 2025, this changes. The government is removing the concept of domicile from the tax system. Instead, IHT will apply to anyone who’s been UK resident for at least 10 out of the last 20 tax years. This is known as the “long-term residence test.” Once you meet this test, you’re treated as “deemed domiciled” for IHT purposes, and your worldwide assets come into scope.

What is Deemed Domicile?

Deemed domicile is a status that means, for tax purposes, you’re treated as if you’re UK domiciled—even if you’re not. Under the new rules, you’ll be deemed domiciled if you’ve lived in the UK for 10 years or more. There’s also a “tail” provision: even after you leave the UK, you’ll remain within the IHT net for up to 10 years, unless you’ve been non-resident for a full decade.

For example, if you moved to London in 2015 and have lived here ever since, you’ll be deemed domiciled from April 2025. If you leave the UK in 2026, you’ll still be exposed to UK IHT on your worldwide assets until 2036, unless you stay away for 10 consecutive years.

How Worldwide Assets Become Exposed to UK IHT

Once you’re deemed domiciled, UK IHT applies to everything you own—no matter where it’s located. This includes:

• Overseas property (villas in Spain, apartments in New York, chalets in Switzerland)

• International investment portfolios

• Shares in foreign companies

• Art collections, yachts, and other high-value assets

Let’s say you own a £30 million property portfolio spread across Monaco, Dubai, and Hong Kong. Under the old rules, these assets were outside the UK IHT net. From April 2025, if you’re deemed domiciled, they could be taxed at 40% on death, subject to available exemptions and reliefs.

Example: Trust Structures and International Assets

Consider Freya, who moved to the UK in 2010 and built a £30 million portfolio of properties in France, Italy, and the US. She set up an offshore trust in Jersey in 2017, transferring her overseas assets into the trust to keep them outside UK IHT.

Under the new rules, the protection offered by offshore trusts is changing. If Freya is deemed domiciled, assets she settled into the trust while she was non-UK resident may still be excluded from IHT—provided the trust was set up before 6 April 2025 and meets certain conditions. However, any new assets added after that date, or new trusts created, will be subject to the residence-based IHT regime.

If Freya wants to add her new Miami penthouse to the trust in 2026, it could be exposed to UK IHT if she’s still within the 10-year residence window.

Strategies: Protecting Your Wealth

If you’re concerned about the impact of these changes, there are steps you can take:

1. Review Existing Trusts and Structures
   If you’ve already settled assets into offshore trusts, check when and how those assets were added. Trusts created before April 2025 may still offer protection, but new additions could be caught by the new rules.
   
   

2. Timing Asset Transfers
   If you’re planning to transfer assets into a trust, consider doing so before April 2025. After that date, the residence-based test will apply, and you may lose the excluded property status for new additions.
   
   

3. Exit Planning
   If you’re thinking about leaving the UK, be aware of the 10-year tail provision. You’ll need to be non-resident for a full decade before your worldwide assets fall outside the UK IHT net. If you leave for only a few years, you’re still exposed.
   
   

4. Segregate UK and Non-UK Assets
   Keep clear records of which assets are UK-situs and which are overseas. This will help you and your executors calculate IHT liabilities and claim any available reliefs.
   
   

5. Family Planning
   Consider the domicile and residence status of your spouse and children. Transfers between spouses may be exempt, but only if both are UK domiciled or deemed domiciled. Mixed-status families need careful planning to avoid unexpected tax bills.

Transitional Provisions and Immediate Actions

The government is consulting on transitional rules, but the key message is clear: act before April 2025 if you want to preserve the excluded property status of your overseas assets. After that, the window closes for new trusts and additions.

If you’re already deemed domiciled, or will be soon, review your estate plan. Speak to your trustees, update your asset registers, and consider whether you need to restructure your holdings. If you’re planning to leave the UK, make sure you understand the 10-year tail and what it means for your family.

Real Example: International Lifestyle, Real Consequences

James, a tech entrepreneur, moved to the UK in 2012. He owns a £15 million villa in the South of France, a £10 million art collection in New York, and a £5 million stake in a Singaporean business. He set up a Guernsey trust in 2018, transferring his overseas assets into it.

With the new rules, James’s trust may still protect assets settled before April 2025. But if he buys a new property in Dubai in 2026 and adds it to the trust, it could be exposed to UK IHT if he’s still within the residence window. If James leaves the UK in 2027, he’ll need to stay away for 10 years before his worldwide assets are safe from UK IHT.

Final Checklist

• Review your residence history and calculate when you’ll be deemed domiciled.

• Audit your trusts and asset structures—check when assets were settled.

• Consider transferring assets before April 2025 if you want to preserve excluded property status.

• Plan for the 10-year tail if you’re thinking of leaving the UK.

• Keep clear records and update your estate plan.

Feeling Overwhelmed? You’re Not Alone

Navigating the new IHT rules can feel daunting, especially if you have significant international assets. The key is to act early, get organised, and make sure your structures are fit for purpose. The rules are changing, but with careful planning, you can protect your family’s wealth and avoid unnecessary tax bills.

Disclaimer: This article provides general information for educational purposes only. It is not legal, financial, or tax advice. Outcomes can vary based on your personal circumstances.