If you’re a non-domiciled individual living in the UK or planning to leave, changes to the Inheritance Tax (IHT) regime could soon have a major impact on your estate.
From April, the Government is scrapping the long-standing focus on domicile and replacing it with a system based on long-term residence.
This change will bring non-doms, many of whom have relied on careful planning and offshore structures, into much broader tax exposure
From April, the concept of UK domicile will no longer decide whether overseas assets fall within the scope of IHT.
Instead, any individual who has been a UK resident for 10 of the past 20 tax years will be considered a long-term resident.
Once that threshold is reached, your entire worldwide estate becomes liable to UK IHT from the start of year eleven.
Even if you pack your bags and leave the UK, the taxman won’t immediately let go.
A new tail provision means your estate may remain taxable for between three and 10 years, depending on how long you were resident before your departure.
For example, someone who has been a UK resident for 13 years will face a three-year tail.
Each additional year of residence beyond that extends the tail by a further year, up to a maximum of 10.
That said, there is a silver lining. If you are a non-UK domiciled person and you leave the UK before the changes kick in and can prove your non-dom status as of 30 October 2024 – your exposure is limited to a flat three-year period after departure.
Trusts used to be a go-to solution for safeguarding non-UK assets.
After April 2025, however, trusts created by long-term UK residents could see non-UK assets pulled into the tax net.
While some protections exist for trusts settled before 30 October 2024, they are limited.
In addition to 10-year charges, there is now also the risk of an exit charge on assets moving back into excluded property status when someone loses long-term residence status.
Starting April 2026, reliefs for non-UK businesses and farms (specifically Agricultural Property Relief (APR) and Business Relief (BR)) will be restricted.
The first £1 million of qualifying assets may still get relief, but anything beyond that is only partially protected, a big change for families holding international enterprises.
These changes are substantial, but with the right advice and timely planning, it is still possible to manage your estate in a way that protects your family’s future.
Need clarity on your next steps? Speak to our team today.
