Out of sight, out of tax: how long-term leavers escape UK IHT

The UK has fundamentally rewritten inheritance tax rules. These changes offer major opportunities for individuals planning to leave the UK permanently.

Over the past year, the UK has fundamentally rewritten the rules on who is subject to inheritance tax (IHT) on their worldwide estate. These changes offer a major opportunity for certain individuals planning to leave the UK and this post explains why.

What were the old rules?

Until 6 April 2025, IHT liability depended on your domicile. In simple terms:

• Non-UK domiciled individuals were only taxed on their UK assets
• UK domiciled individuals were taxed on their worldwide assets

While non-doms could become "deemed domiciled" after long residence, the reverse wasn't true: if you were UK domiciled under common law, there was no route to be deemed non-domiciled. Even after decades abroad, ties as minor as a dormant London club membership could leave your estate exposed to a 40% tax.

This created huge uncertainty, especially for British-born clients or those with British parents.

The new long-term residence regime

From 6 April 2025, IHT exposure now depends on your residence, not your domicile. More precisely it depends on whether you are a long-term resident. An individual will be long-term resident once they have been UK resident for 10 out of the previous 20 tax years. Once an individual leaves the UK there is a "tail" which determines how long they will remain exposed to IHT as a non-resident. The length of the tail depends on how long the individual has been UK resident for and is set out in the table below:

For example, an individual who has been UK resident for 14 years out of the previous 20 will lose their worldwide IHT exposure from the start of their 5th year of non-residence. It is important to note, however, that the tail is only practically useful for those who remain non-UK resident. It will not assist those who return to the UK as they would be immediately re-exposed to IHT on their return.

What this means for leavers

For those planning to leave the UK permanently, these changes are significant. If you have been UK resident for less than 10 out of the previous 20 tax years, you will not be subject to IHT on your worldwide estate from the moment you leave. Even if you have been UK resident for longer, the tail provides a clear path to escape worldwide IHT exposure.

This is a major shift from the old domicile-based rules and provides much greater certainty for tax planning.