Living Abroad to Avoid UK Inheritance Tax?

The Rules Are Changing from April 2025

If you’ve moved abroad — or are thinking about it — to reduce your exposure to UK inheritance tax (IHT), a major change is on the horizon.

From 6 April 2025, the UK is abolishing the concept of domicile for tax purposes. In its place comes a new Long-Term Resident (LTR) test — and it has far-reaching implications, particularly those hoping to mitigate IHT.

What Is the Long-Term Resident Test?

Under the new regime, if you’ve been UK resident for at least 10 out of the last 20 tax years, you’ll be considered a Long-Term Resident (LTR).

This status means your worldwide estate will be subject to UK inheritance tax.

Leaving the UK? You Could Still Be Taxed for Years to come

A key feature of the LTR regime is the so-called IHT tail. Even after you leave the UK, you don’t immediately fall out of the inheritance tax net. Your worldwide assets may still be exposed to UK IHT for several years after departure, depending on how long you were UK resident prior to leaving.

The “IHT Tail” Explained

The length of your exposure depends on your UK residence history:

• Fewer than 10 years in the UK: No IHT tail
• 10–13 years: 3-year IHT tail
• Each additional year of UK residence beyond 13: Adds 1 year to the tail
• Maximum tail: 10 years (for 20+ years of UK residence)

The test resets completely if you return to the UK in the year following 10 consecutive years of non-residence.

A Real-Life Example

Jacques Martin has lived in the UK for 12 years and is concerned about IHT on his global estate. He’s considering leaving, but his teenage children are still in school. He plans to remain for another 3 years.

Here’s what that means:

• If Jacques leaves now (at 12 years) → 3-year IHT tail → exposure ends April 2029
• If he leaves in 3 years (at 15 years) → 5-year IHT tail → exposure ends April 2034

Lesson: Every extra year of UK residence adds to your IHT exposure — something to factor into your timing if you’re planning a move.

Still Own UK Assets?

It’s important to remember: UK-situs assets — such as UK property remain subject to UK IHT no matter where you live or whether you’re classed as an LTR. There’s no escape from that part of the net.

What About Existing Expats?

Many long-standing UK expats will automatically be classed as Non-UK LTRs from 6 April 2025, provided they haven’t met the 10-out-of-20-year test.

Final thoughts

The shift from a domicile-based to a residence-based inheritance tax system represents a seismic change in the UK tax landscape.

If you’re unsure how the changes will affect your estate, or whether you’re on track to become a Long-Term Resident, it’s essential to review your situation now. Planning ahead could make a significant difference to your family’s future tax exposure.