Tax Planning
Inheritance Tax Overhaul: From Domicile to Long-Term UK Residence
The UK’s shift from domicile-based to residence-based IHT from 6 April 2025 means non-UK assets and trusts now taxed based on 10-of-20-year UK residence; here’s how families and trustees must adapt.
By NomadicTax Research Team • 5-8 min read • April 21, 2026
## What’s Happened
Under the IHT reforms introduced alongside Budget 2025, the concept of domicile has been replaced by **long-term UK residence** for determining liability on non-UK assets and trusts. From **6 April 2025**, non-UK assets could be subject to UK IHT if an individual has been resident in the UK for **10 of the last 20 tax years** ([gov.uk](https://www.gov.uk/government/publications/hm-revenue-and-customs-trusts-and-estates-newsletters/hmrc-trusts-and-estates-newsletter-april-2025?utm_source=openai)).
Previously excluded property trusts (non-UK trusts) may now lose their exclusion status if the settlor is a long-term UK resident, or benefits flow to a long-term UK resident beneficiary; exit charges may arise when this status changes ([gov.uk](https://www.gov.uk/government/publications/hm-revenue-and-customs-trusts-and-estates-newsletters/hmrc-trusts-and-estates-newsletter-april-2025?utm_source=openai)).
## Who Needs to Act
- **Individuals with overseas assets**: Real estate, bank accounts, shares outside the UK might now fall into IHT calculations.
- **Trustees**: Those managing trusts settled by people who are or become long-term UK residents must assess whether assets remain excluded or become chargeable.
- **Offshore trusts and exclusions**: Trusts that were previously excluded under the old domicile-based rules may now require reporting and valuation under new rules, especially when settlor residence or beneficiary status triggers change ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4705?utm_source=openai)).
## Practical Examples
- **Example 1**: Maria moved to the UK in 2014 and has been resident every year since. In 2025 she dies owning non-UK property. Under new rules, these assets are included in her estate for IHT because she meets the 10-of-20-year rule.
- **Example 2**: A trust set up by John in 2018 who later becomes long-term UK resident will see the trust’s non-UK property become taxable under IHT law, especially if the beneficiaries are UK residents or John has been long-term UK resident when the trust is charged (e.g., at death or exit) ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4705?utm_source=openai)).
## Steps to Take Now
- Audit your estate and overseas assets: make sure valuations are up-to-date and you’re aware of what may fall into scope.
- Review trust structures: especially where settlors or beneficiaries may cross into long-term UK residence.
- Consider filing updated reports or schedules (IHT401a, D31a, D31b) if required under the new guidance ([gov.uk](https://www.gov.uk/government/publications/hm-revenue-and-customs-trusts-and-estates-newsletters/hmrc-trusts-and-estates-newsletter-april-2025?utm_source=openai)).
- Where applicable, plan gifts, use reliefs, or restructure ownership before or early in your period of UK residence.
The IHT reforms represent a major shift. Although many will be unaffected, those with foreign property, trusts, or complex family arrangements should start considering their strategies now.