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The April 2025 reforms fundamentally changed when someone faces IHT on their worldwide assets. Domicile no longer decides it; residence does. The threshold falls to 10 years, and for the longest-resident the tail after departure is extended — catching more long-term UK residents in the worldwide IHT net.
This guide is a companion to our broader guide on non-dom IHT reforms 2025. Both guides cover the same reform from different angles — this guide focuses on who is affected and what the practical differences are; the companion guide covers planning options in more depth.
Under the rules that applied before 6 April 2025, a person's IHT liability depended on their domicile — broadly, the country they considered their permanent home. Key features of the old system:
Many high-net-worth international individuals resident in the UK for fewer than 15 years legally avoided UK IHT on non-UK assets — using the non-dom status as part of their overall tax planning.
From 6 April 2025, IHT is based on residence rather than domicile:
The key group newly caught by the change are those who had been UK resident for 10–14 years before April 2025. Under the old rules, they had not yet reached the 15-year deemed domicile threshold. Under the new rules, they became long-term UK residents on 6 April 2025 — subject to worldwide IHT from that date.
For such individuals, the change meant an immediate shift from paying IHT only on UK assets to paying IHT on worldwide assets — with no transition period.
Even for short-term UK residents (under 10 years), UK-situs assets have always been within the UK IHT net. "UK-situs" assets include:
Assets outside the UK — overseas property, foreign bank accounts, non-UK listed shares — are outside the IHT net until the long-term resident threshold is crossed.
Excluded property trusts (EPTs) were a widely used planning structure for non-doms — settling non-UK assets into trust before becoming deemed domiciled locked in the excluded property status indefinitely.
The transitional position for EPTs settled before 6 April 2025 is complex. In broad terms, the protection afforded by a pre-existing EPT depends on when it was settled relative to the settlor's IHT status at the time. Some trusts retain excluded property status; others do not. The rules are set out in HMRC's Inheritance Tax Manual at IHTM47000 onwards.
New trusts settled after 6 April 2025 by long-term UK residents cannot achieve excluded property status — the assets will be in the IHT net.
Because a long-term UK resident is within the UK inheritance tax net on worldwide assets, the ordinary UK exemptions and reliefs apply to them in the same way as to anyone else:
Domicile no longer decides this either. Where the transferor is a long-term UK resident and the recipient spouse or civil partner is not, the spouse exemption is capped rather than unlimited. The cap is the nil-rate band applying at the date of the transfer — currently £325,000 — and it is a cumulative lifetime limit, reduced by any amount already used against the same exemption.
The recipient spouse or civil partner can elect to be treated as a long-term UK resident for IHT purposes, which removes the cap but brings their worldwide assets into the UK IHT net. Once made, the election cannot be revoked; it lapses only after 10 consecutive tax years in which the person is not UK resident.
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