Estate Planning for Non-UK Domiciled Individuals: IHT and Wills Guide
Non-UK domiciled individuals only pay UK IHT on UK-situated assets — but long-term residents eventually become “deemed domiciled” and lose this protection. The 2025 reform replaced the non-dom system with a residence-based IHT test. Here is what you need to know.
UK-Domiciled vs Non-UK-Domiciled: The IHT Difference
UK-domiciled person
- → IHT on worldwide assets
- → Full unlimited spouse exemption (if spouse is also UK-domiciled)
- → Excluded property trusts: assets in trust may retain excluded property status if established when non-dom
- → From 2025: also includes “long-term residents” (10+ years UK residence)
Non-UK-domiciled person
- → IHT on UK-situated assets only
- → Non-UK assets are “excluded property” — outside UK IHT
- → Foreign spouse inheriting from UK-dom spouse: capped exemption
- → Window to establish excluded property trust before deemed domicile triggers
Key Thresholds and Dates
| Item | Pre-6 April 2025 rule | Post-6 April 2025 rule |
|---|---|---|
| Deemed domicile trigger | 15 of 20 tax years UK-resident | 10 consecutive years UK-resident ('long-term resident') |
| Leaving UK — exposure ends after | 3 years of non-residence (broadly) | 10 years of non-residence |
| Spouse exemption (UK-dom to non-dom) | Capped at NRB + £325,000 (£650,000 total) unless s267ZA election | Based on residence; specialist advice needed |
| Excluded property trust — protection | Trust settled before deemed domicile retains EPT status permanently | Trusts before 30 Oct 2024: broadly protected; trusts after by long-term residents: no EPT status |
| Non-UK assets in estate | Excluded property if not deemed/actually domiciled in UK | Excluded if not a 'long-term resident' (under 10 years) |
Wills for Non-UK Domiciled Individuals
A non-dom living in the UK with assets in multiple countries typically needs:
→ An English will for UK assets
Covering UK property, UK bank accounts, UK investments, and UK-situs assets. This should explicitly limit its scope to UK assets if separate foreign wills exist.
→ A will (or succession plan) for each foreign jurisdiction
For non-UK assets — especially property. The foreign will should comply with local formalities and coordinate with the English will to avoid accidental revocation.
→ Domicile clause in the will
A statement of domicile — 'I declare that I am domiciled in [country] as at the date of this will' — is useful evidence of domicile intention, though not conclusive. It puts HMRC on notice of the non-dom claim.
→ Choice of law for succession
Under EU Succession Regulation (if assets are in EU countries), a non-dom UK resident can elect the law of their nationality to apply to their EU assets — potentially avoiding forced heirship in France, Spain, or Germany.
Frequently Asked Questions
What is domicile and how does it affect IHT?
Domicile is a legal concept distinct from residence or nationality. Every person has a domicile — the country they regard as their permanent home and intend to remain in indefinitely. You are born with a domicile of origin (your father's domicile at your birth, or your mother's if parents were unmarried). You can acquire a domicile of choice by settling in another country with the intention of making it your permanent home and abandoning your previous domicile. Domicile of origin is very 'sticky' — it revives if you leave a country without acquiring a new domicile of choice. For IHT purposes: a UK-domiciled person is liable to IHT on their worldwide assets. A non-UK-domiciled person is liable to IHT only on their UK-situated assets. Non-UK assets owned by a genuine non-dom are 'excluded property' — outside the scope of UK IHT.
What is deemed domicile and how does it arise?
Deemed domicile under s267 IHTA 1984 catches long-term UK residents who are not actually UK-domiciled. Under the pre-2025 rules (for deaths before 6 April 2025): you are deemed domiciled in the UK for IHT if you were UK-resident in at least 15 of the 20 tax years ending with the current year. Once deemed domiciled, your worldwide assets become liable to UK IHT — even if your actual domicile is foreign. The deemed domicile provisions have been significantly reformed from 6 April 2025 (see FAQ below). Deemed domicile is one of the most important traps for long-term UK residents who believe their foreign assets are protected. Even if your intention has always been to return to your home country, 15 years of UK residence triggers deemed domicile.
What are the 2025 reforms replacing non-dom IHT status?
From 6 April 2025, the government replaced the non-dom IHT system with a residence-based system. The key changes: (1) The 15-of-20-years deemed domicile test is abolished and replaced with a 10-year test: individuals who have been UK tax-resident for 10 or more consecutive years become 'long-term residents' subject to UK IHT on worldwide assets; (2) On leaving the UK, it takes 10 years of non-residence before the worldwide IHT exposure ends; (3) Excluded property trusts created while the settlor was non-UK-domiciled retain their excluded property status for trusts created before 30 October 2024 — but new trusts created after this date by long-term residents will not qualify; (4) The non-dom spouse cap (see below) is abolished and replaced with a spousal exemption based on residence rather than domicile. The new rules are complex and the interaction with existing trusts requires specialist advice. For deaths before 6 April 2025, the old deemed domicile rules apply.
What is the non-dom spouse exemption cap?
Under s18(2) IHTA 1984 (pre-2025 rules), when a UK-domiciled person leaves assets to a non-UK-domiciled spouse or civil partner, the IHT spouse exemption is capped. The full unlimited spouse exemption applies only when both spouses are UK-domiciled. When a UK-domiciled spouse leaves assets to a non-dom spouse: (1) The first £325,000 (the nil-rate band) passes exempt in the usual way; (2) An additional £325,000 can pass exempt to the non-dom spouse under the capped exemption (total: £650,000 exempt); (3) Anything above £650,000 is potentially subject to 40% IHT. The non-dom spouse could elect to be treated as UK-domiciled for IHT purposes (s267ZA election) to unlock the full unlimited exemption — but this would expose their worldwide non-UK assets to UK IHT. This election is irrevocable except in limited circumstances. From 6 April 2025, the cap is replaced by the new residence-based spousal exemption.
What is an excluded property trust and how does it work?
An excluded property trust (EPT) is a trust settled by a non-domiciled individual with non-UK assets. Under pre-2025 rules: (1) Non-UK assets settled into a trust by a non-domiciled settlor are excluded property — outside the scope of UK IHT; (2) Once settled, the trust retains excluded property status even if the settlor subsequently becomes deemed domiciled (or even actually UK-domiciled) — provided the trust was created before the settlor became deemed domiciled; (3) This creates a powerful planning window: a non-dom should establish an EPT with non-UK assets before reaching deemed domicile status (before 15 years of UK residence under pre-2025 rules; before 10 years under post-2025 rules); (4) Assets in the trust remain outside UK IHT on the settlor's death. Under the 2025 reforms: EPTs created before 30 October 2024 broadly retain their protected status. EPTs created after 30 October 2024 by long-term residents (10+ years) do not get excluded property status. Non-doms planning to use EPTs should have done so urgently before the 2025 rule changes. Existing EPTs may need to be reviewed to ensure continuing compliance.
Make Sure Your UK Assets Are Covered by a UK Will
Whatever your domicile status, your UK property and assets need a valid English will. The WillSafe kit covers England and Wales from £19.97 — a solid foundation to coordinate with any foreign estate planning.