Non-Domicile Inheritance Tax UK: IHT for Non-Doms and the April 2025 Changes Explained (2026)
UK IHT applies to all UK-sited assets regardless of domicile. Non-UK domiciled individuals pay IHT only on UK assets — unless they have become a 'long-term UK resident' (LTUKR) from April 2025 (10 of 20 UK tax years), at which point worldwide assets enter the IHT estate. Previously the deemed domicile threshold was 15 of 20 years.
| Domicile / LTUKR Status | IHT Scope | Excluded Property | Notes |
|---|---|---|---|
| UK domicile | Worldwide assets (s267 IHTA 1984) | None — all worldwide assets in estate | All assets taxable at 40% above NRB; domicile of origin vs domicile of choice; acquires UK domicile of choice by settling permanently |
| Non-UK domicile — NOT long-term UK resident (under 10yr in 20) | UK-sited assets only | Non-UK sited assets = excluded property (s48 IHTA) | Before April 2025: old deemed domicile (15-of-20yr) applied; now replaced by LTUKR 10-of-20yr test |
| Non-UK domicile — long-term UK resident (10+ of 20 UK tax years) | Worldwide assets (same as UK domicile) | Foreign assets lose excluded property status | Becomes worldwide IHT from the year LTUKR status is acquired; all non-UK assets now in estate |
| LTUKR — leaving UK (tail period) | Worldwide assets for up to 10 years after leaving | Tail period: non-UK assets remain in estate during tail | Even after leaving UK, worldwide IHT continues during the tail period; plan around the tail when emigrating |
| Non-UK domicile — UK-sited assets (all) | UK land, buildings, bank accounts (UK branch), UK shares, gilts (unless excluded) | Non-UK sited assets excluded; UK gilts (some excluded for non-doms — check current rules) | No exemption from IHT on UK sited assets for non-doms; NRB still applies (£325k) |
| Overseas trust — excluded property trust (pre-April 2025 settlement by non-dom, non-LTUKR) | Trust assets may be excluded property | Excluded property: no periodic/exit charges where settlor was non-UK domicile at time of settlement AND at charge dates | From April 2025: if settlor is LTUKR at any 10yr anniversary/exit, trust assets may become relevant property |
UK IHT on worldwide assets: s267 IHTA 1984 (UK domicile) + Finance Act 2025 (LTUKR — 10-of-20-yr test from April 2025). Excluded property: s48 IHTA 1984 — non-UK sited assets of non-UK domicile, non-LTUKR persons; certain UK gilts (non-dom, non-ordinarily resident). Previous deemed domicile: 15-of-20-yr test (FA2008) — abolished from 6 April 2025. LTUKR tail period: up to 10yr+ of continued worldwide IHT after leaving UK (depends on years of UK residence). Spousal exemption limited for non-UK domicile spouse: £325,000 (not unlimited — s18 IHTA 1984); s267ZA IHTA election to be treated as UK domicile. Excluded property trusts: s48(3) IHTA — from April 2025 settlor's LTUKR status at charge dates matters. IHT double tax treaties: France, Italy, USA, India, Pakistan, South Africa, Netherlands, Sweden, Switzerland, Ireland. Unilateral credit: s159 IHTA 1984. UK-sited assets: UK land/buildings; UK bank accounts (UK branch situs); UK-registered shares; UK gilts; tangible assets physically in UK.
Non-Domicile and IHT: Complete Guide
UK IHT and domicile — the fundamental principle
UK IHT (Inheritance Tax — IHTA 1984) is a charge on the estate of a deceased person and on certain lifetime gifts. The scope of IHT depends on the deceased's domicile at death: (1) UK domicile: IHT applies to worldwide assets — wherever the property is situated, it is in the UK IHT estate (s267 IHTA 1984). (2) Non-UK domicile (and not a long-term UK resident): IHT applies only to UK-sited assets — non-UK assets are 'excluded property' (s48 IHTA 1984) and fall outside the IHT estate. Domicile is a concept of general law, not just tax law — a person acquires a domicile of origin at birth (usually the father's domicile) and can acquire a domicile of choice by settling permanently in another country with the intention to remain there indefinitely. Domicile is different from residence, nationality, and citizenship. A person can be UK-resident for many years and still have a foreign domicile of origin (if they have not permanently abandoned their foreign domicile and acquired a UK domicile of choice). Before April 2025: a foreign-domiciled person who had been UK-resident for 15 of the 20 previous tax years was treated as 'deemed UK domicile' for IHT purposes (old FA2008 deemed domicile rule). From April 2025 (Finance Act 2025): the deemed domicile rule was abolished and replaced with the 'long-term UK resident' (LTUKR) test.
The April 2025 long-term UK resident test — what changed
From 6 April 2025, the 'deemed domicile' concept for IHT was abolished. Instead, a new 'long-term UK resident' (LTUKR) status now determines whether a non-UK domiciled person is subject to worldwide IHT. Under the LTUKR test: a person becomes a long-term UK resident in any tax year in which they have been UK tax-resident in 10 or more of the previous 20 tax years. At the point of becoming an LTUKR: ALL worldwide assets (including non-UK assets that were previously excluded property) enter the IHT estate on death or on lifetime gifts (CLTs). Before April 2025, the threshold was 15 of 20 years (the old deemed domicile test). From April 2025, it is 10 of 20 years — meaning many non-UK domiciled individuals who had been UK-resident for 10-14 years (previously safe from deemed domicile) became LTUKRs for the first time on 6 April 2025. Urgent action for long-standing non-UK domiciled UK residents: review estate planning; consider whether UK residence should be broken before reaching 10 years; review overseas trust structures; review whether excluded property elections or overseas trust protections are still effective. The Finance Act 2025 introduced transitional protections for some existing overseas trusts — take specialist cross-border tax advice.
UK-sited assets — always subject to IHT for non-doms
Regardless of domicile or LTUKR status, ALL UK-sited assets are subject to IHT for non-UK domiciled persons. UK-sited assets include: (1) UK land and buildings — any property in England, Wales, Scotland, or Northern Ireland; freehold, leasehold, and beneficial interests in UK real estate; (2) UK bank accounts — accounts held at a UK branch of any bank (including UK branches of foreign banks); the situs of a bank account is where the branch is; (3) UK-registered shares — shares in companies registered in the UK (note: shares in foreign-registered holding companies that own UK assets may be foreign-sited even if the assets are in the UK); (4) UK government gilts and securities — UK government debt is UK-sited; some gilts held by non-UK domiciled persons were historically exempt but this exemption has been substantially reduced; (5) Assets physically located in the UK — tangible moveable property (jewellery, art, antiques) physically in the UK at the date of death; (6) UK intellectual property and business assets registered in the UK; (7) From April 2027: DC pension funds managed in the UK (Budget 2024 reform — pensions enter the IHT estate for all persons including non-doms). IHT on UK assets of non-doms: subject to the same NRB (£325,000) and, if applicable, RNRB (£175,000 — if a UK home passes to direct descendants). Non-UK domiciled individuals ARE entitled to the NRB.
Excluded property — what is outside the IHT estate for non-doms
For a non-UK domiciled person who is NOT a long-term UK resident, certain assets qualify as 'excluded property' (s48 IHTA 1984) and are outside the IHT estate: (1) Non-UK sited assets — foreign bank accounts, overseas property, foreign shares, overseas investments; any asset with a situs outside the UK (s48(1)(a) IHTA); (2) UK government gilts and securities held by persons not ordinarily resident in the UK (under the terms of specific gilts); (3) Certain overseas settlements — property in an overseas trust settled by a non-UK domiciled, non-LTUKR settlor may qualify as excluded property, meaning no IHT on the settlor's death and no periodic/exit charges on the trust (s48(3) IHTA 1984). From April 2025, the excluded property trust rules were modified: the settlor's LTUKR status at the time of each 10-year anniversary and capital exit (not just at the time of settlement) now determines whether the trust assets are excluded property. This is a significant change — trusts that were previously 'locked in' as excluded property trusts may now be subject to periodic/exit charges if the settlor becomes an LTUKR at a charge date. Spousal IHT exemption for non-UK domiciled spouses: where a UK-domiciled person is married to a non-UK-domiciled person, the spousal exemption (s18 IHTA 1984) is limited — only £325,000 passes IHT-free to the non-UK-domiciled spouse (not the unlimited exemption that applies between two UK-domiciled spouses). The non-UK domiciled spouse can elect to be treated as UK-domiciled for IHT purposes (s267ZA IHTA 1984) to access the full spousal exemption — but this brings all their worldwide assets into the UK IHT net.
Tail period — IHT after leaving the UK
Under the pre-April 2025 rules, a person who had acquired deemed domicile lost it only 3 tax years after permanently leaving the UK. From April 2025, the LTUKR 'tail period' is more complex and longer: (1) Persons with 10-19 years of UK tax residence: LTUKR status continues for 10 years after the last year of UK tax residence. During the tail period, worldwide assets remain in the IHT estate. (2) Persons with 20+ years of UK tax residence: the tail period is longer — it continues until the person has been non-UK resident for a sufficient number of years to reduce their UK tax residence below 10 in the previous 20. Planning for emigration from the UK: (1) Identify the LTUKR tail period — how many years before the tail ends; (2) If the tail period is long, consider holding non-UK assets via structures that may be exempt during the tail; (3) Seek specialist cross-border estate planning advice — the interaction of UK IHT, the destination country's succession/estate tax, and any double tax treaty is complex. Double tax treaties: the UK has IHT treaties with France, Italy, USA, India, Pakistan, South Africa, Netherlands, Sweden, Switzerland, and Ireland. These treaties provide credit relief (not exemption) for foreign tax paid on the same assets — so if the foreign country also taxes the same asset, the higher of the two taxes is paid (credit against the lower).
Frequently Asked Questions
Do non-domiciled people pay inheritance tax in the UK?
Yes — all non-UK domiciled persons pay UK IHT on their UK-sited assets (land/buildings in the UK, UK bank accounts, UK-registered shares, assets physically in the UK). Non-UK assets are 'excluded property' (s48 IHTA 1984) and outside the IHT estate — unless the person has become a 'long-term UK resident' (LTUKR) under the April 2025 rules (10 or more of the previous 20 tax years UK-resident). An LTUKR pays IHT on worldwide assets — the same as a UK-domiciled person. The NRB (£325,000) is available to non-UK domiciled persons on their UK assets.
What changed for non-doms and IHT in April 2025?
From 6 April 2025 (Finance Act 2025), the 'deemed domicile' rule (15-of-20-year test) was abolished and replaced with the 'long-term UK resident' (LTUKR) test: a person is an LTUKR if they have been UK tax-resident in 10 or more of the previous 20 tax years. Once LTUKR, ALL worldwide assets (including previously excluded non-UK assets) enter the IHT estate. This change caught non-UK domiciled individuals who had been UK-resident for 10-14 years — they were not deemed domicile under the old rules but became LTUKRs on 6 April 2025. The tail period (continuation of worldwide IHT after leaving the UK) is also longer under the new rules (up to 10+ years depending on years of UK residence).
What are 'excluded property' and excluded property trusts for IHT?
Excluded property (s48 IHTA 1984) comprises assets outside the UK IHT estate for non-UK domiciled, non-long-term-UK-resident persons: non-UK sited assets (overseas property, foreign bank accounts, foreign investments); certain UK gilts held by non-UK domicile/non-ordinarily-resident persons. Excluded property trusts: overseas trusts settled by a non-UK domiciled, non-LTUKR settlor — trust assets may be excluded property, meaning no periodic or exit charges apply. From April 2025, the excluded property trust rules changed: the settlor's LTUKR status at each 10-year anniversary and capital exit now determines whether the trust assets are excluded property — if the settlor became an LTUKR between charge dates, the trust assets may no longer be excluded. Existing excluded property trusts need specialist review.
Is the spousal exemption different for non-UK domiciled spouses?
Yes — where a UK-domiciled person is married to a non-UK-domiciled spouse, the spousal exemption (s18 IHTA 1984) is limited to £325,000 (not unlimited). Assets above £325,000 passing to the non-UK-domiciled spouse are taxable. The non-UK-domiciled spouse can make an election (s267ZA IHTA 1984) to be treated as UK-domiciled for IHT purposes — accessing the full unlimited spousal exemption. However: the election also brings all the spouse's worldwide assets into the UK IHT net. The election is irrevocable while the conditions are met. For non-UK domiciled surviving spouses: consider the election carefully — it may significantly increase the IHT exposure on the non-UK spouse's death.
How long does IHT continue after a non-dom leaves the UK?
Under the April 2025 rules, the 'tail period' (continuation of worldwide IHT after leaving the UK) depends on the number of years of UK tax residence: for persons who were LTUKR (10-19 years UK residence), the tail continues for 10 tax years after the last year of UK tax residence — worldwide assets remain in the IHT estate during this period. For persons with 20+ years of UK residence, the tail can last even longer — until the person's UK tax-resident years (in the previous 20) drop below 10. Planning: emigrate early (before reaching 10 years UK residence to avoid becoming LTUKR); or plan around the tail period if already LTUKR before leaving the UK.
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