United Kingdom · Tax regime
Residence-based inheritance tax (long-term UK resident test)
In force from 6 April 2025. Domicile and deemed domicile are gone; the test is now purely residence-based. Autumn Budget 2025 added a GBP 5m cap on relevant property charges for pre-30 October 2024 excluded property trusts, retrospective to 6 April 2025.
The IHT tail is the most widely misreported feature of the 2025 reform: it is NOT a flat 10 years. HMRC's manual at IHTM47020 sets a sliding scale — leave with 13 or fewer resident years and the tail is 3 years; 14 years gives 4; 15 gives 5; and so on one-for-one up to a maximum of 10 years at 20+ years of residence. For a family that left at year 12 or 13, the difference between the widely-quoted 10 years and the actual 3 is worth tens of millions on a large estate, and it changes the entire departure calculus.
The facts
- Total landed cost
- 40% of the worldwide estate above the GBP 325,000 nil-rate band once long-term resident status attaches — on a GBP 50m estate that is roughly GBP 19.9m
- Timeline
- 120–240 months — Long-term resident status attaches once you have been UK resident in 10 of the previous 20 tax years; the reset requires 10 consecutive years of non-residence
- Physical presence
- Determined by the Statutory Residence Test, year by year, over a rolling 20-year lookback
- Family
- tested individually — spouses acquire and shed long-term resident status on their own residence records, which frequently diverge
- Permanent residency
- n/a
- Citizenship
- n/a
- Dual citizenship
- Permitted
- Requirements
- UK resident in at least 10 of the previous 20 tax years triggers worldwide IHT exposuretail on departure: 3 years for 13 or fewer resident years; 4 at 14; 5 at 15; 6 at 16; 7 at 17; 8 at 18; 9 at 19; 10 at 20 or more10 consecutive tax years of non-residence resets the test entirely
- The 10-of-20 test is retrospective. Years of UK residence long before 6 April 2025 count, so people who were never remotely close to deemed domicile under the old 15-of-20 rule woke up long-term resident on day one.
- The tail is a sliding scale, not a flat 10 years — but it cuts both ways. At 20+ resident years the tail is the full 10, meaning a lifetime UK resident who leaves at 65 remains exposed to 40% on the worldwide estate until 75.
- Excluded property trusts no longer work as a permanent shelter. Settlor long-term resident status now drags trust property into the relevant property regime, and the protection those trusts were sold on has gone. The GBP 5m cap is per 10-year cycle and only for trusts holding excluded property at 30 October 2024.
- The full reset needs 10 consecutive non-resident years. A single year back in the UK during the tail restarts the analysis.
- From 6 April 2026 UK agricultural land is in scope even when held through non-UK entities, closing the offshore-company wrapper.
- From 6 April 2026 Agricultural and Business Property Relief is capped: 100% relief on the first GBP 1m only, 20% IHT on the excess. The allowance is now transferable between spouses — a late reversal of the original policy.
- Charity exemption is now limited to gifts to UK charities — from 26 November 2025 for lifetime gifts and 6 April 2026 on death. Foreign charitable structures in existing wills need review.
- Spouses are tested separately. A common pattern is one spouse long-term resident and one not, which makes the order of death and the domicile-era spousal exemption planning obsolete.