From 6 April 2025, the UK’s Inheritance Tax (IHT) system will shift from being based on domicile to being determined by residency.

An individual will be liable for IHT on their global assets if they are considered a long-term resident. A long-term resident is defined as someone who has been resident in the UK for 10 out of the 20 tax years immediately before the tax year of their death or gift of asset.

This means that anyone who moves to the UK for any reason will be subject to UK IHT on their worldwide assets once they have been a resident here for 10 out of the past 20 tax years. As such, it’s crucial to plan ahead to protect one’s assets.

It’s important to note that when calculating the 10 years of residence, any part of a tax year counts as a full year, and years in which a person is considered treaty non-resident also count for this test.

These new rules not only apply to those coming to the UK, but also to individuals who have moved abroad.

For instance, someone who has lived in the UK for 10 out of the previous 20 tax years will still be subject to UK IHT on their global assets for 10 years after they leave the country. This is referred to as the “tail” provision.

These changes offer more clarity for UK nationals living overseas. If they don’t meet the 10-year UK residency requirement, they won’t be subject to UK IHT on their assets located outside the UK. All individuals are subject to UK IHT on their UK assets, subject to any treaty relief that may be available.