Non-dom abolition changes IHT treatment of overseas assets

From 6 April 2025, the non-domicile regime was abolished and replaced with a residence-based system for both income tax and inheritance tax purposes. The change has significant implications for estates where the deceased was formerly treated as non-domiciled for IHT.

Under the old rules, a non-domiciled individual was only subject to UK IHT on their UK-situs assets. From April 2025, IHT liability is determined by whether the deceased was a "long-term UK resident" — defined as having been UK resident for 10 or more of the previous 20 tax years. Long-term UK residents are subject to IHT on their worldwide assets, regardless of domicile.

For estates currently in administration, solicitors should check whether the deceased spent 10 or more years in the UK in the 20 years prior to death. Where the deceased had significant overseas assets and was formerly treated as non-domiciled, the new rules may bring those assets into the UK IHT net for the first time.

A 10-year "tail" provision applies to former long-term UK residents who left the UK: they remain subject to worldwide IHT for a period of up to 10 years after leaving, depending on how long they were UK resident. This transitional provision will be relevant for estates in the coming years where the deceased emigrated relatively recently.

HMRC has published updated guidance on the transition and how to determine long-term residence status. Solicitors should review any estate with overseas assets and a client who may have previously relied on non-dom status.