What This Guide Covers
- What changed on 6 April 2025 when domicile stopped deciding UK inheritance tax
- What "long-term resident" actually means, and the 10-out-of-20-years test
- Why this can bring overseas property and assets into an estate’s UK tax bill for the first time
- Who this is most likely to catch out as an executor
- What to do if you’re administering an estate that may be affected
If you’re administering an estate for someone who spent most of their adult life in the UK but was born abroad, always held a foreign passport, or simply never saw the UK as their permanent home — there’s a change from 2025 that may mean the estate owes far more Inheritance Tax than you’d expect, on assets you may not have thought to even list.
We know this is a dense, technical area to land on someone already dealing with grief and paperwork. This guide sets out, in plain terms, what changed, who it affects, and what to check before you assume the family home abroad, the savings account overseas, or the inherited apartment in another country sits outside UK tax.
What changed on 6 April 2025
For decades, whether someone’s worldwide assets were exposed to UK Inheritance Tax came down to their domicile — a legal concept rooted in where they were born and where they intended to permanently settle, which could remain unchanged even after 30 or 40 years of living in the UK. Someone who moved to Britain in their twenties but always considered another country "home" could often keep assets held outside the UK entirely outside the scope of UK IHT, no matter how long they’d actually lived here.
From 6 April 2025, that test was abolished for Inheritance Tax and replaced with a residence-based system. Domicile no longer matters. What matters now is how long someone has actually lived in the UK.
The 10-out-of-20-years test
Under the new rules, someone becomes a "long-term resident" once they have been UK tax-resident for at least 10 of the previous 20 tax years, counting up to the tax year in which they die. Once that threshold is crossed, their worldwide estate — not just their UK assets — falls within the scope of UK Inheritance Tax.
| Old rule (before 6 April 2025) | New rule (from 6 April 2025) |
|---|---|
| Based on domicile — birthplace and long-term intention | Based on residence — actual years spent living in the UK |
| A UK resident could remain "non-UK domiciled" for life | 10 years’ UK residence in the last 20 makes someone a long-term resident |
| Non-doms often shielded non-UK assets from UK IHT | Long-term residents are taxed on worldwide assets, wherever held |
There is also an exit tail: someone who leaves the UK doesn’t necessarily step outside the rules immediately. Depending on how long they were resident, they can remain within scope of UK IHT for between three and ten years after they stop living here, before non-UK assets fall back outside the net.
Who this is most likely to catch out
This isn’t a niche rule for the ultra-wealthy with offshore trusts. In our experience, it’s most likely to affect ordinary families in situations like these:
Someone who moved to the UK decades ago and never formally changed their domicile. Many people who settled in Britain in the 1970s, 80s or 90s kept a property, savings, or family land in their country of origin, on the reasonable assumption that "home" for tax purposes was wherever they were born. That assumption no longer protects those assets.
A returning British expat. Someone who spent 15 years working abroad, then moved back to the UK for their final decade of life, can be a long-term resident under the new test even if they always considered themselves domiciled overseas.
Multi-generational immigrant families. Where the deceased retained property in a parent’s home country — a flat, farmland, or a family house — that asset was often never disclosed for UK tax purposes because it genuinely didn’t need to be under the old rules. It very likely does now.
What this means practically if you’re an executor
The mechanics of applying for probate and reporting to HMRC haven’t changed — Inheritance Tax is still due within six months of death, and you’ll still need to value the estate and report it in the usual way. What has changed is the size of the estate you need to value. If the person who died meets the 10-out-of-20-years test, you now need to identify and value every asset they held anywhere in the world, not just the UK ones, before you can be confident the IHT return is complete and correct.
Getting this wrong isn’t a technicality — an incomplete IHT account can see an application stopped, or worse, create a personal liability issue for the executor if HMRC later finds assets that should have been declared. And because a bigger worldwide estate usually means a bigger tax bill, families are increasingly finding they need to raise cash faster than they expected — often by selling the one asset that’s actually liquid and local: a UK property in the estate.
What to do next
If there’s any possibility the person who died had lived in the UK for a decade or more at any point, however settled they seemed, get a professional determination of their residence history against the 10/20 test before you finalise the IHT account — don’t assume the old domicile position still applies. If it turns out worldwide assets are now in scope and the tax bill is larger than the estate’s UK cash can cover, the property in the estate becomes the thing standing between you and a clean, on-time payment to HMRC.
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