IHT Non-Domicile Spousal Election: Electing UK Domicile Under s267A IHTA 1984
Where one spouse is UK-domiciled and the other is not, the spousal IHT exemption is capped at £325,000 — not unlimited. Under s267A IHTA 1984, the non-dom spouse can elect to be treated as UK-domiciled for IHT, unlocking the unlimited exemption. But the election also brings worldwide assets into the UK IHT net — so it requires careful cost-benefit analysis before being made.
IHT Impact: With and Without the Spousal Election
| Scenario | Without Election | With Election (s267A) |
|---|---|---|
| UK-domiciled spouse dies — leaves estate to non-dom surviving spouse | Spousal exemption capped at £325,000 (the NRB). Amounts above £325,000 taxed at 40%. | Full unlimited spousal exemption applies. No IHT on any amount left to the non-dom spouse who has elected. |
| Non-dom spouse dies — leaves estate to UK-dom surviving spouse | Only UK situs assets are within the charge. Foreign assets outside the UK estate. Unlimited spousal exemption applies on UK assets. | Worldwide assets now within the IHT charge on death. Unlimited spousal exemption applies to UK-dom survivor. No cap on the exemption — but the IHT net is wider. |
| Non-dom spouse makes lifetime gift to UK-dom spouse | Gift of foreign situs assets not subject to IHT (non-dom not charged on foreign assets). Gift of UK situs assets: spousal exemption applies (unlimited for UK-dom donee). | All lifetime gifts (including foreign assets) now potentially subject to IHT. Unlimited spousal exemption still applies on gifts to UK-dom spouse. |
| Ownership of excluded property trust | Non-dom can hold excluded property (foreign assets) in an excluded property trust — permanently outside the IHT charge even after becoming UK-deemed-domiciled by long residence. | Election ends excluded property trust treatment for assets settled after the election. Assets settled before the election may retain their excluded property status (depending on when they were settled). |
Frequently Asked Questions
What is the IHT spousal exemption for a non-domiciled spouse?
Under the standard rules, all transfers between UK-domiciled spouses are exempt from IHT — the unlimited spousal exemption (s18 IHTA 1984) applies to any amount. However, where the recipient spouse is not domiciled in the UK, the exemption is capped. For deaths and gifts from 17 July 2013 onwards, the cap is the nil-rate band (£325,000 in 2026/27). Any amount above £325,000 transferred to a non-domiciled spouse is taxable at 40% on death (or at the PET/CLT rates on lifetime transfers). This cap recognises that the non-domiciled spouse is not subject to UK IHT on their worldwide estate — only on UK situs assets. The cap effectively prevents the full unlimited spousal exemption from being used to shift assets permanently outside the UK IHT net.
What is the s267A domicile election and how does it work?
Section 267A IHTA 1984 (introduced by Finance Act 2013) allows a non-UK-domiciled spouse or civil partner of a UK-domiciled person to elect to be treated as UK-domiciled for all IHT purposes. Once the election is made: (1) the elected person's worldwide assets become subject to UK IHT (the same as a UK-domiciled individual); (2) the unlimited spousal IHT exemption applies in full — the £325,000 cap no longer applies; (3) the election remains in force for as long as the electing person remains resident in the UK, and for 3 years after they leave the UK. The election is irrevocable while it is in force — it cannot be undone except by ceasing UK residence and waiting 3 years. The election is made by the non-domiciled spouse in writing to HMRC (form IHT domicile election).
When is the s267A election beneficial?
The election is beneficial where: (1) the UK-domiciled spouse has a large estate and wants to pass it to the non-dom surviving spouse without the £325,000 IHT cap; (2) the non-dom spouse's worldwide estate is modest and there is little benefit in keeping foreign assets outside the UK IHT charge; (3) the couple intends to remain UK resident long-term, so the election is likely to remain in force permanently in any event; (4) the couple's combined IHT planning relies on the full spousal bypass structure — e.g. first death passes everything to the survivor, second death then passes to children with full combined NRB and RNRB. Without the election, the first death triggers IHT above £325,000 if the non-dom spouse is the survivor.
When is the s267A election harmful?
The election is harmful where: (1) the non-dom spouse has significant foreign assets outside the UK IHT net — after election, those assets become chargeable worldwide; (2) the non-dom spouse holds or plans to hold foreign assets in an excluded property trust — the election ends excluded property treatment for assets settled after the election date; (3) the couple intends to emigrate from the UK within 3 years — the election unwinds after 3 years of non-UK residence, but assets settled into trusts during the election period may have lost their excluded property status; (4) the IHT saving from the unlimited spousal exemption is outweighed by the additional IHT exposure on worldwide assets. The election requires careful modelling — the benefit on the first death must be weighed against the increased IHT burden on the second death.
Can the election be revoked?
The election cannot be revoked while the electing spouse remains UK resident. It automatically lapses 3 years after the electing spouse ceases to be resident in the UK (within the meaning of the Statutory Residence Test). Once lapsed, the non-dom spouse reverts to being treated as non-UK-domiciled for IHT — the capped £325,000 spousal exemption applies again, and worldwide assets (other than UK situs assets) fall outside the UK IHT charge. However, assets that were settled into trust or otherwise disposed of during the election period may have been affected by the election's impact on excluded property status — unwinding the election does not necessarily restore excluded property treatment.
How does the s267A election interact with deemed domicile by long UK residence?
A non-UK-domiciled individual automatically becomes 'deemed UK-domiciled' for IHT purposes after being resident in the UK for at least 15 of the previous 20 tax years (from April 2017 onwards). From that point, they are subject to UK IHT on their worldwide assets — including assets that were foreign-excluded-property before deemed domicile. The s267A election is relevant before deemed domicile is reached — it allows the non-dom spouse to elect UK-domicile early (perhaps to unlock the unlimited spousal exemption on the first death) rather than waiting to accumulate 15 years of UK residence. For non-dom spouses approaching or already past the 15-year deemed domicile threshold, the election may be academic — they are already UK-deemed-domiciled by long residence, and the unlimited spousal exemption applies in any case.
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