UK Domicile Is Over - The New Residence-Based IHT System Explained

Introduction

The UK’s April 2025 reform is the biggest change to expat tax in a generation.

This reform has practical consequences for internationally mobile families because it can affect:

• whether non-UK assets are within UK IHT,
• how long non-UK assets can remain in scope after leaving the UK, and
• how existing structures (including trusts and cross-border ownership arrangements) should be reviewed when someone becomes UK resident again or plans a return.

Compared with the prior approach - where domicile and deemed domicile concepts often dominated - this framework places more emphasis on residence measured in UK tax years and how those years stack up in a rolling lookback.

But very few people understand how deep the impact goes.

Because the old rules were built on identity:

• Where were you born?
• Where are your parents from?
• Did you intend to return to the UK?
• What is your “permanent home”?

The new rules focus much more on residence history (measured in tax years) and what happens when you leave or return. That creates clarity - but it also means internationally mobile families need to be more deliberate about long-term residence patterns.

Let’s break down what changes - and what you need to do about it.

The Old System: Why Domicile Mattered So Much

 Under the pre-April 2025 rules:

1. If you were UK-domiciled → worldwide IHT

40% tax on everything you own, anywhere in the world.

2. If you were non-UK-domiciled → UK assets only

If you were non-UK domiciled (and not deemed domiciled), non-UK assets were generally outside UK IHT, while UK-situated assets remained in scope. Specific anti-avoidance rules (for example, around UK residential property held through offshore structures) could still bring certain assets into charge.

3. Domicile of origin

Domicile of origin was typically derived from a parent and could be complex in practice. Changing it generally required living elsewhere and demonstrating an intention to reside permanently or indefinitely outside the UK.

4. Domicile of choice

You could, in theory, adopt a new domicile by leaving the UK permanently, and making some or all of the following changes:

• selling your UK home
• moving your entire life
• moving your family
• shifting your centre of gravity
• proving permanent intention
• cutting personal + economic ties

5. Deemed domicile (15/20 rule)

You became taxable globally again if resident for 15 of the previous 20 tax years.

The previous framework could be complex in practice and sometimes led to uncertainty - particularly where intentions and long-term connections were disputed. So, from 6 April 2025, the UK moved to a residence-history framework for when non-UK assets can be within UK IHT.

The New System (April 2025): Residence-Based IHT

From 6 April 2025, the conditions for when non-UK assets can fall within UK IHT are linked much more closely to residence history, using the ‘long-term UK resident’ concept (broadly, UK resident in at least 10 of the previous 20 UK tax years), together with the post-departure tail rules.

✔️ A “10 out of 20 years” residency test

If you were UK resident for 10 of the last 20 tax years, you are within scope for global IHT.

✔️ A “tail period” after leaving the UK

Where someone meets the long-term UK resident condition, non-UK assets may remain within scope for a period after departure. In broad terms, the tail can extend for several tax years and is driven by the individual’s residence history and the detailed statutory conditions and can extend for multiple UK tax years (including up to 10 in some fact patterns).

✔️ Trusts and structuring implications

Trust planning remains relevant, but outcomes can be more dependent on timing and on whether the settlor (or other relevant person) meets the long-term UK resident condition. The post-6 April 2025 framework also introduces new IHT concepts and charging mechanics for certain overseas property in trust (including ‘non-excluded overseas property’ and a defined exit-charge regime in specified circumstances), so existing structures should be reviewed against the post-6 April 2025 rules rather than assuming historic treatment continues unchanged.

✔️ Worldwide assets taxed if within the residence test

Asset location matters differently now: UK-situated assets remain in scope under longstanding principles, and non-UK assets can also be brought into scope where the long-term UK resident conditions (or tail) apply.

✔️ Domicile is no longer the main connecting factor for IHT on non-UK assets

For many internationally mobile families, the key analysis is now residence history, the rolling lookback, and the tail. (Some domicile-linked concepts can still be relevant elsewhere in IHT planning  -  for example, elections that can affect spouse exemption outcomes and the treatment of certain legacy structures  -  so it’s worth checking the detail in context).

This means:

If you return to the UK and become UK tax resident again, this can bring additional UK-resident tax years into the rolling 20-tax-year lookback and, depending on your wider residence history (and any tail), can place non-UK assets back within UK IHT scope.

This changes everything for expats. 

Please note that UK-situated assets remain within IHT under long-standing rules; the key change discussed here is when non-UK assets can be within scope under the long-term UK resident and tail conditions.

What the 10/20 Rule Really Means

The UK wants to tax global wealth based on prolonged residence, not heritage.

The New Rule

You are within the UK IHT net if:

• You were UK tax resident for 10 of the previous 20 tax years, OR
• You are within the tail period after leaving.

What counts as a “year”?

A UK tax year (6 April – 5 April), in which you are tax resident according to the Statutory Residence Test (SRT).

Why this can catch people out in practice

Because many expats:

• lived in the UK until age 30–40
• worked in the UK early in their careers
• moved abroad for 10–15 years
• plan to return later
• or travel back frequently
• or maintain ties
• or work part-time in UK roles
• or plan to retire in the UK

This often means:

✔️ they ALREADY have 10 years
✔️ or they meet 10 years the moment they return
✔️ or they will meet 10 years after a short return
✔️ and future UK-resident tax years can increase the number of UK-resident years within the rolling 20-tax-year lookback (which can change the IHT outcome over time). 

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The Tail Period: The Hidden Threat to Expats

Even after leaving the UK, long-term UK residence history can keep non-UK assets within UK IHT scope for a period. The length of this post-departure tail is driven by the individual’s residence history and can be up to 10 UK tax years in some cases. Practically, this means families should not assume that becoming non-resident automatically removes IHT exposure on non-UK assets immediately.

How the New Rules Affect Expats (Where Practical Planning Matters)

The practical change is that non-UK assets can be brought into UK IHT scope by residence history, not just by historic domicile concepts. For families who have lived in (or may return to) the UK, the key work is often mapping UK-resident tax years, understanding whether the long-term UK resident condition is met, and factoring in the post-departure tail (which can be up to 10 tax years in some cases, depending on residence history).

For internationally mobile people, pattern matters. If someone moves in and out of the UK across multiple tax years, it may be easier than expected to accumulate enough UK-resident years to meet the 10/20 threshold. It is not that travel “automatically restarts a clock”  -  it’s that each UK-resident tax year can add to the rolling 20-year lookback, and this can change the IHT position over time. 

Split-country working and commuting therefore needs careful monitoring, because frequent UK presence can sometimes tip someone into UK residence under the Statutory Residence Test in particular tax years  -  and it is UK-resident tax years, rather than UK visits alone, that feed into the long-term UK resident calculation.

Trust planning remains relevant, but it is no longer “set-and-forget”. The post-6 April 2025 framework means trust outcomes may depend more heavily on timing, who is treated as long-term UK resident, and the type of trust property and charges that apply. For families with existing excluded property / offshore trust planning, the sensible approach is to review structures against the post-6 April 2025 rules rather than assuming historic results continue unchanged.

Mixed-nationality couples and international families may also need a refresh of their planning. This is less about labels like “UK spouse / non-UK spouse” and more about how residence history, exemptions/reliefs, and ownership structures interact in practice (including will planning across jurisdictions).

Finally, overseas property can be within UK IHT where the long-term UK resident conditions (or tail) apply. A more precise way to frame it is: if an individual is within UK IHT on a worldwide basis under the residence-history test, then non-UK property can be in scope, subject to the usual IHT rules (reliefs, exemptions, debts, valuation, and asset mix).

Separately, UK-situated assets can remain within UK IHT under long-standing rules even where someone is not within scope on a worldwide basis, so internationally mobile families often need to model both (i) UK-asset exposure and (ii) any wider exposure driven by the long-term UK resident conditions.

The Biggest Misconceptions British Expats Have

Myth 1: “I broke my domicile years ago.”

From 6 April 2025, domicile plays a reduced role in determining when non-UK assets can be within UK IHT. For many internationally mobile families, the key analysis becomes residence history and the long-term UK resident conditions.

Myth 2: “I’ve lived abroad 15 years , so I must be outside UK IHT.”

In practice, it depends on how many UK-resident tax years appear in the rolling 20-year lookback, and whether any post-departure tail still applies.

Myth 3: “If I move back for a year or two it won’t matter.”

A UK return can matter because UK-resident tax years may accumulate within the rolling 20-year lookback. Whether that creates exposure depends on the wider residence history and the facts in the relevant years.

Myth 4: “My offshore trust protects my assets.”

Trusts can still be useful, but protections are not ‘set-and-forget’. Outcomes may depend on who is long-term UK resident, the type of trust property, and what happens during periods of UK residence.

Myth 5: “Leaving the UK ends my liability.”

No - the tail period applies.

Myth 6: “Only Brits are affected.”

Foreign nationals who lived in the UK also fall within the 10/20 scope.

Case Studies (Real Expats, Real Consequences)

Case Study 1 - The Dubai Executive Returning at 52

Lived in the UK until age 32 (building up a long run of UK-resident tax years).
Moves abroad, then considers a UK return later in life.
Under the new framework, the key question is whether (at the point of return) the individual has been UK-resident in at least 10 of the previous 20 tax years, and whether any post-departure tail is in point. If the return (and subsequent years) moves them into the long-term UK resident condition (or brings them within a tail), non-UK assets may come into (or remain within) UK IHT scope  -  which is why modelling the residence timeline before returning is so important.

Worldwide estate: £4.5 million
Illustrative IHT exposure could be significant (often up to 40% on chargeable value), but the actual outcome would depend on reliefs and exemptions (e.g., spouse exemption, nil-rate bands, business/property reliefs), asset composition, debts, and the detailed residence position.
Avoidable? Yes - with pre-return planning.

Case Study 2 - The Spain–UK Split Couple

Wife lives in Marbella full-time.
Husband commutes to London 120 days per year.

Depending on his UK residence history (and whether the long-term UK resident condition or tail applies), his own worldwide estate may be within the UK IHT net. The planning focus is then typically (i) what assets he owns (including any jointly owned property and business interests), (ii) how wealth is held between spouses, and (iii) whether any transfers, gifts, or trust arrangements could create avoidable exposure  -  all subject to the usual exemptions and reliefs.

Case Study 3 - The Offshore Trust That Was "Safe"

Trust set up in 2010 by a non-dom.
Settlor moves back to the UK for a period after years abroad.
Under the post-6 April 2025 framework, the impact on an offshore trust can depend on whether the settlor meets the long-term UK resident condition, the nature of the trust property (including whether it is treated as ‘non-excluded overseas property’), and the timing of additions, distributions and relevant charge events.
Illustrative point: a structure that was historically effective under the old rules may need active review and re-modelling when the family’s residence pattern changes.

Case Study 4 - The Long-Term Gulf Expat Who Thought He Was Out
Was UK resident for around 10 tax years earlier in life, then lived abroad for many years.
Whether they are within scope on a worldwide basis at any given time depends on how many of those UK-resident tax years fall within the rolling 20-tax-year lookback, and whether a post-departure tail applies.
This is why two people who both ‘left the UK years ago’ can have very different outcomes depending on the exact years they were resident and the timing of any returns.

What Expats Must Do Now (Action Steps)

This is where the article becomes practical.

These are the steps that determine whether your global estate is protected or exposed.

Step 1 - Map Your Long-Term Residence Position
Start by listing which UK tax years you were UK resident under the SRT, then map that against the rolling lookback and consider whether a post-departure tail could apply. This gives a clearer view of when non-UK assets may be within UK IHT scope and how a future UK return could change the position.

Step 2 - Audit Your Global Assets

List:

• UK assets
• Overseas properties
• Foreign bank accounts
• Investment portfolios
• Business ownership
• Trusts
• Crypto
• Joint assets
• Offshore structures

This helps identify where the exposure is.

Step 3 - Review Whether a Return to the UK Is Wise or Risky

Returning for:

• a short-term project
• children’s schooling
• family support
• a promotion

…may reignite global tax exposure for decades.

Step 4 - Trust Strategy Review

If you have trusts or other family structures, consider a structured review: who is treated as long-term UK resident, what trust property is involved, and how additions/distributions align with periods of UK residence. Where relevant, trustee location and administration should be reviewed as part of the wider governance picture.

Step 5 - Draft an Expat IHT Plan

This includes:

• spousal strategy
• gifting timelines
• property ownership structure
• treaty usage
• life insurance
• trust alignment
• asset location
• residency strategy

Step 6 - Update Your Will in All Jurisdictions

You need a coordinated, cross-border approach.

Step 7 - Build a Residency Strategy for the Next 20 Years

Yes - 20.

Because the new system is a rolling test.

Think in terms of:

• where you’ll be
• how long you’ll stay
• when you’ll return
• whether you’ll leave again
• whether your children will settle in UK

This is where coordinated advice can be valuable, because the test is rolling and long-term: small changes in residence patterns can affect IHT scope over time.

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The Four Expat Profiles Most at Risk

1. Brits in the UAE, Qatar or Saudi

High earners.
Global assets.
Often plan to return at 45–55.
Usually already have 10 UK years.

2. Brits in Europe (Spain, Portugal, Italy, France, Cyprus)

Still maintain deep UK ties.
Often return regularly.
Mixed families.
Complex asset mix.

3. Brits in Singapore or Hong Kong

High asset growth.
International investment portfolios.
High IHT risk.

4. Brits in “dual life” patterns

Live abroad.
Work partly in UK.
Spouse lives in one country.
Children in another.

These profiles often have more moving parts (multiple jurisdictions, frequent UK presence, future return plans), so they are more likely to need a detailed long-term residence and succession review.

Common Issues That Can Undermine IHT Planning

Common issues include assuming historic domicile-based outcomes still apply automatically; not modelling residence history against the rolling lookback; returning to the UK without considering how additional UK-resident years may affect IHT scope; overlooking the post-departure tail; and leaving older structures (trusts, holding companies, ownership arrangements, wills) unreviewed after a major change in residence pattern.

How Expats Protect Their Global Estate

Effective planning typically brings together: a clear view of residence history, how any structures interact with the post-6 April 2025 rules, sensible lifetime gifting strategy where appropriate, property ownership review, coordinated wills, and a realistic plan for any future UK return - supported by good record-keeping to evidence residence status.

Where multiple jurisdictions are involved, local succession rules and local tax can also be relevant alongside UK IHT. 

Conclusion

The abolition of domicile is not a small technical change.
It is a fundamental rewrite of how British expats - and former UK residents - will be taxed for decades to come.

For some people, it’s a wake-up call.
For others, it’s a once-in-a-generation opportunity to plan properly.
And for many, it’s a material change they may not yet have factored into long-term family planning.

But the message is simple:

If you’ve ever lived in the UK, if you may return, or if you hold global assets… this affects you.

And while the rules are changing, one truth remains:

The key point is that residence history now plays a bigger role in determining whether non-UK assets are within UK IHT. With clear modelling of residence years and careful planning around moves and returns, many families can make more informed decisions about succession and long-term structuring.

This article is a general summary of a complex area and is not personal tax or legal advice. Outcomes depend on your circumstances and detailed facts, so specialist advice should be taken before acting.