IHT Long-Term Resident Test UK: New Residence-Based IHT from April 2025
From 6 April 2025, UK inheritance tax scope is determined by residence — not domicile. The old 15/20-year deemed domicile rule was abolished. Anyone resident in the UK for 10 or more of the preceding 20 tax years is a “long-term resident” and subject to IHT on worldwide assets, with a 10-year tail after departure.
Old Rules vs New Rules at a Glance
| Rule set | Test | Consequence | Tail after leaving UK |
|---|---|---|---|
| Old rules (before 6 April 2025) | Deemed domicile: 15 of the previous 20 tax years UK resident (s267 IHTA 1984) | Worldwide assets within IHT scope | 3-year tail after leaving (formerly domiciled residents) |
| New rules (from 6 April 2025) | Long-term resident (LTR): 10 of the previous 20 tax years UK resident | Worldwide assets within IHT scope | 10-year tail after losing UK residence |
| Non-LTR (fewer than 10 of 20 years) | Not a long-term resident | Only UK situs assets within IHT scope | No tail — worldwide assets immediately excluded |
How the 10-Year Long-Term Resident Test Works
A person is a “long-term UK resident” (LTR) if they have been UK resident under the Statutory Residence Test (SRT) for at least 10 of the 20 tax years ending with the tax year in which the transfer (death or lifetime chargeable transfer) occurs.
The 20-year look-back window is a rolling window — it moves forward each year. A person who has been continuously UK-resident since arriving 11 years ago is a LTR from the moment they complete their 10th UK-resident year. A person who arrived 9 years ago is not yet a LTR, but will become one in their 10th resident year.
Residence is determined year by year under the SRT. Tax years run from 6 April to 5 April. A split year of arrival or departure can still count as a qualifying year if the person is treated as UK resident for that tax year under the SRT.
A person who is not a LTR — fewer than 10 qualifying UK-resident years — is subject to IHT only on their UK situs assets. Their non-UK assets (foreign property, overseas bank accounts, shares in non-UK companies) are “excluded property” under IHTA 1984 s6(1) and outside IHT scope entirely.
The 10-Year Tail After Leaving the UK
If a LTR individual stops being UK resident (by leaving the UK and meeting the non-residence conditions under the SRT), they do not immediately lose LTR status for IHT. They remain a LTR for a further 10 tax years — the “tail period”.
During the tail period, the individual's non-UK assets remain within the scope of UK IHT. Only after completing 10 consecutive non-UK-resident tax years does LTR status end and non-UK assets become excluded property again.
The 10-year tail is substantially longer than the practical tail under the old rules. Under the old system, a person who had not actually acquired a UK domicile (i.e. retained a non-UK domicile of origin or had not formed the intention to remain permanently in the UK) lost deemed domicile status within 3 years of ending UK residence. The new 10-year tail cannot be shortened by planning around domicile — it is a pure residence count.
Excluded Property Trusts: Transitional Rules
Under the old regime, a trust settled by a non-domiciled person (before the settlor became deemed domiciled) holding foreign assets was an “excluded property trust”: the trust property was outside IHT's relevant property regime, so no 10-year periodic charge and no exit charge applied.
The April 2025 reforms include transitional provisions to protect pre-existing excluded property trusts. In broad terms: overseas assets held in a trust settled before 6 April 2025, when the settlor was not yet a LTR, can retain excluded property status under transitional protection. The pre-2025 trust is “grandfathered” for those assets.
However, new assets added to the trust after 6 April 2025 will be assessed under the new rules. Trustees and settlors of such trusts require specialist legal advice to determine whether their specific structure qualifies for transitional protection and what constraints apply to ongoing management of the trust.
UK situs assets held in excluded property trusts have never benefited from excluded property status and remain subject to the relevant property charges regardless of the settlor's domicile or LTR status.
IHT Planning for Internationally Mobile Individuals
For those approaching 10 years of UK residence: consider the IHT implications before reaching LTR status. Once the 10th qualifying year is crossed, worldwide assets come within scope and the 10-year tail begins on departure.
For those already LTR who are considering leaving the UK: the 10-year tail cannot be avoided — plan accordingly. Double tax treaties between the UK and the country of relocation may provide partial relief. The UK has IHT treaties with a small number of countries (France, India, South Africa, USA, Pakistan, Netherlands, Sweden, Italy, Switzerland). Outside these, IHT and foreign inheritance tax may both apply on the same assets during the tail period.
Excluded property planning: for non-LTR individuals, assets settled into an offshore trust while not yet a LTR may retain excluded property status. Specialist advice is essential — the rules are highly technical and the legislation is recent.
Spouse/civil partner: the same LTR rules apply to transfers between spouses. The restricted spousal exemption (currently £325,000 when the receiving spouse is not a LTR) continues to apply where the receiving spouse has not yet reached LTR status. The deemed domicile election (IHTA 1984 s267ZA) has been replaced — a non-LTR spouse can no longer elect into worldwide IHT exposure to obtain the unlimited spousal exemption under the old mechanism. The new rules provide an equivalent election.
Frequently Asked Questions
What replaced the old deemed domicile rules for IHT from April 2025?
The Finance Act 2025 abolished the domicile-based IHT system from 6 April 2025 and replaced it with a residence-based system. Under the old rules (IHTA 1984 s267), a person was deemed domiciled for IHT if they had been UK resident in at least 15 of the 20 previous tax years (the '15/20-year rule') or had been UK domiciled within the 3 years before the transfer. From April 2025, whether an individual is subject to IHT on their worldwide assets is determined entirely by UK residence — domicile under the general law is no longer the test for IHT purposes. The new test is the 'long-term UK resident' (LTR) test: a person is a long-term resident if they have been UK resident for at least 10 of the 20 tax years ending with the relevant tax year (the year of death or lifetime chargeable transfer). If a person is a LTR, they are subject to IHT on their worldwide assets in the same way as a UK-domiciled individual under the old rules.
Exactly how is the 10-year long-term resident test calculated?
A person is a long-term UK resident if they meet the UK residence condition for at least 10 of the 20 tax years immediately before the tax year in which the relevant transfer occurs (the 'relevant 20-year period'). A tax year runs from 6 April to 5 April. A person meets the UK residence condition for a tax year if they are UK resident for that year under the Statutory Residence Test (SRT — ITTOIA 2005). The 20-year look-back window moves year by year, so the number of qualifying resident years inside the window changes over time. Examples: (1) Someone who arrived in the UK 15 years ago and has been UK resident continuously since arrival has been UK resident for 15 of the preceding 20 years — they are a LTR on first test. (2) Someone who arrived in the UK 9 years ago has not yet reached 10 years — they are not yet a LTR. (3) Someone who was resident in the UK for 12 years (years 1–12), then left and returned for 2 more years (years 15–16) has been resident for 14 of the previous 20 years and is a LTR. Residence for split years under the SRT: a year in which a person arrives in or leaves the UK can be counted as a UK-residence year if they meet the SRT residence test for that year.
What is the 10-year tail for IHT after leaving the UK?
Under the old rules, the only 'tail' for IHT was the 3-year rule for formerly domiciled residents — a person who had actually been UK domiciled remained subject to worldwide IHT for 3 years after acquiring a foreign domicile. Under the new April 2025 rules, the tail period is 10 years: if a person was a long-term UK resident at the time they left the UK (i.e. had been UK resident for 10+ of the preceding 20 years), they remain subject to worldwide IHT for 10 full tax years after they stop being UK resident. Only after completing 10 consecutive non-UK-resident years does the tail end. This is a major change. Under the old rules, a non-dom who left the UK and lost deemed domicile status after only 3 years of absence (by losing UK domicile of choice before or shortly after leaving) had a very short tail. Under the new rules, anyone who has been UK-resident for 10+ years must wait 10 full years of non-UK residence before their non-UK assets fall outside IHT scope. For wealthy internationally mobile individuals, this dramatically extends the period during which a UK IHT charge can arise on a death or chargeable transfer.
How do the transitional rules protect excluded property trusts settled before April 2025?
Under the old rules, overseas assets held in a trust settled by a non-domiciled person (before the settlor became deemed domiciled) were 'excluded property' and outside the scope of IHT periodic (10-year) and exit charges. These trusts were widely used by wealthy non-doms to hold non-UK assets outside IHT. Under the new April 2025 rules, the status of such trusts depends on transitional provisions. In summary: (1) An excluded property trust settled before 6 April 2025 retains excluded property status for the pre-2025 foreign assets held in the trust — provided those assets were non-UK assets settled when the settlor was not yet a LTR. The transitional rules effectively 'grandfather' the excluded property status of foreign assets in pre-2025 trusts. (2) New assets added to the trust after 6 April 2025 may not benefit from excluded property status — additions are assessed under the new rules. (3) UK assets held in such trusts remain within the scope of IHT charges even under transitional protection. The transitional rules are complex and the legislation requires careful analysis in each case. Trustees of pre-2025 excluded property trusts should take specialist advice on whether their specific trust structure benefits from transitional protection.
I have been in the UK for 12 years and am planning to leave — what happens to my IHT exposure?
If you have been UK resident for 12 of the preceding 20 tax years, you are a long-term UK resident (LTR) and your worldwide assets are currently within the scope of UK IHT. If you leave the UK and become non-UK resident, the 10-year tail applies: you remain a LTR for IHT purposes for 10 full tax years after your departure, even though you are no longer UK resident for income tax and CGT purposes. Only after 10 consecutive non-UK-resident tax years will the tail end — at that point, if you have not re-entered UK residence, you will no longer be a LTR and your non-UK situs assets will be outside IHT. During the tail period, your non-UK assets remain subject to UK IHT at 40% above the nil-rate band. Planning considerations: (1) Lifetime gifts of non-UK assets may be potentially exempt transfers (PETs) that fall outside the estate if you survive 7 years — but they remain within IHT during the 10-year tail. (2) Double tax treaties may provide partial relief in some countries — the UK has IHT treaties with France, India, South Africa, USA, Pakistan, Netherlands, Sweden, Italy, and a few others. (3) If you re-establish UK residence during the tail period, you will restart the LTR status. (4) The Statutory Residence Test determines UK residence for this purpose — not physical presence alone.
Are the new LTR rules better or worse for non-doms than the old deemed domicile rules?
The new April 2025 rules are materially worse for internationally mobile wealthy individuals in several respects. (1) The threshold for worldwide IHT exposure has fallen from 15 of 20 years to 10 of 20 years — someone who has lived in the UK for 10 years is now fully exposed to worldwide IHT, whereas under the old rules they would still have had 5 years before reaching deemed domicile. For younger, more recent arrivals, the new rules accelerate the onset of worldwide IHT exposure. (2) The tail period has extended dramatically — from a practical 3 years (for most non-doms) to 10 years. Under the old rules, a non-dom who had not acquired a UK domicile could lose deemed domicile within 3 years of leaving. The 10-year tail means many non-doms who leave the UK in 2025 or later will remain exposed to worldwide IHT until 2035 or beyond. (3) There is no domicile-based 'escape route' — under the old rules, a non-dom could maintain a non-UK domicile of origin (or carefully not acquire a UK domicile of choice) and the deemed domicile rules only applied to residence. Under the new system, residence alone determines LTR status — domicile is simply irrelevant. The new rules do preserve the excluded property concept for non-UK assets, so a non-LTR individual (fewer than 10 qualifying years) continues to have non-UK assets outside IHT scope. For recent arrivals, this remains a significant advantage.
International Estate — UK Will and Trust Planning
If you are internationally mobile, your UK will and trust structure must reflect the new LTR rules. WillSafe will kits provide a starting point for your estate planning documents.