If you’re living in the UK but your roots, assets, and family are spread across the globe, inheritance tax (IHT) can feel like a confusing and daunting subject. The rules for non-domiciled individuals—often called “non-doms”—are changing, and it’s more important than ever to understand how you can protect your wealth and plan for your family’s future.

Let’s walk through the essentials, using real-life examples and practical solutions, so you can make informed decisions and avoid costly mistakes.

Non-Dom Status and Current IHT Rules

Non-dom status means you’re resident in the UK but your permanent home—your “domicile”—is elsewhere. For years, this status has offered a significant advantage: only your UK assets were subject to IHT, while your overseas property, investments, and business interests were generally excluded.

For example, if you moved to London from Singapore and kept your main home and business interests abroad, only your UK assets would be taxed at 40% on death. Your £20 million business in Singapore, your villa in Spain, and your offshore investments would be outside the UK IHT net.

But this is changing. From April 2025, the government is moving to a residence-based system. If you’ve lived in the UK for at least 10 out of the last 20 years, you’ll be treated as “deemed domiciled” for IHT purposes. This means your worldwide assets could be exposed to UK inheritance tax, even if you still consider yourself a non-dom.

What Counts as Excluded Property for Non-Doms?

Excluded property is the key concept for non-doms. It refers to assets that are not subject to UK IHT, typically:

• Overseas property (homes, land, commercial buildings)

• Shares in non-UK companies

• Foreign bank accounts

• Trust assets settled while you were non-UK domiciled

For instance, if you set up a family trust in Jersey in 2018 and transferred your overseas business and investments into it, those assets would be excluded from UK IHT—provided you were non-UK domiciled at the time.

However, the rules around trusts and excluded property are tightening. From April 2025, the protection offered by offshore trusts will depend on when and how assets were settled. New assets added after this date, or new trusts created, may not be excluded.

Example: £20 Million Overseas Business and Family Trust

Let’s look at a practical scenario. Priya moved to the UK in 2012 and owns a £20 million business in Dubai. She set up a Guernsey trust in 2016, transferring her business and overseas investments into it. Under current rules, these assets are excluded from UK IHT.

If Priya adds a new property in Monaco to the trust in 2026, it may not be excluded if she’s now deemed domiciled. The timing of asset transfers and trust creation is crucial. If you’re planning to settle new assets, consider doing so before April 2025 to preserve excluded property status.

Planning Strategies: Settlements, Gifts, and Reservation of Benefit

Protecting your wealth from UK IHT requires careful planning. Here are some actionable strategies:

• Use Trusts Wisely: Offshore trusts can shield overseas assets from UK IHT, but only if assets are settled while you’re non-UK domiciled. Review your trusts and check when assets were added. If you’re considering new transfers, act before April 2025.
  
  

• Gifts and Reservation of Benefit: Making gifts of overseas assets can be effective, but beware of the “reservation of benefit” rules. If you give away an asset but continue to benefit from it (for example, gifting a holiday home but still using it), it may still be taxed as part of your estate. Make clean gifts and document them clearly.
  
  

• Segregate UK and Non-UK Assets: Keep clear records of which assets are UK-situs and which are overseas. This helps your executors calculate IHT liabilities and claim reliefs.
  
  

• Exit Planning: If you’re thinking of leaving the UK, remember 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.

Family Considerations: Spouse and Children with Mixed Domicile Status

Family wealth planning can be complicated if your spouse or children have different domicile statuses. Transfers between spouses are usually exempt from IHT, but only if both are UK domiciled or deemed domiciled. If your spouse is non-UK domiciled, the exemption is capped at £325,000 unless they elect to be treated as UK domiciled for IHT purposes.

For example, if you’re deemed domiciled but your spouse is not, you can make an election for them to be treated as UK domiciled. This allows unlimited transfers between spouses, but the election lasts until your spouse has been non-resident for 10 consecutive years.

Children’s domicile status also matters for succession planning. If your children live abroad and are non-UK domiciled, assets passed to them may be treated differently for IHT purposes. Review your wills and trusts to ensure they reflect your family’s circumstances.

Impact of the New Residence-Based IHT Regime

The move to a residence-based IHT regime is a game-changer. If you’ve lived in the UK for 10 years or more, your worldwide assets—including those in trusts—could be exposed to UK IHT. Transitional provisions may protect assets settled before April 2025, but new additions and trusts will be caught by the new rules.

Immediate actions you can take:

• Audit your trusts and asset structures. Check when assets were settled and whether they qualify as excluded property.

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

• Review your family’s domicile and residence status. Make elections for spouses if needed.

• Update your estate plan and keep clear records.

Real Example: Navigating the Changes

David, a British citizen, moved to the UK in 2010 after years in Hong Kong. He owns a £20 million business in Singapore and a family trust in Jersey. He’s planning to buy a new property in Switzerland. With the new rules, David’s trust may still protect assets settled before April 2025, but the Swiss property could be exposed to UK IHT if added after that date. David reviews his trust, consults his trustees, and decides to transfer the property before the deadline.

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

Inheritance tax planning for non-doms is complex, but with careful action, you can protect your family’s wealth. The rules are changing, but you have options. Review your structures, act before the deadlines, and make sure your estate plan reflects your wishes and circumstances.

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.