Changes to UK Inheritance Tax: What You Need to Know

The UK Inheritance Tax (IHT) system has recently undergone significant changes. These changes came into effect on 6th April 2025 and impact both UK domiciled individuals, and those who qualify as Long-Term Residents (LTR).

Understanding these changes is crucial for effective estate planning and tax management.

Domicile vs Long Term Residency (LTR)

Previously, UK domiciled individuals paid estate tax on their death on any value over the nil rate band on global assets, with a potential 100% spouse exemption. However, from 6th April 2025, the concept of domicile has been replaced by 'Long Term Residency' (LTR).

An individual is considered an LTR if they have been a UK resident for 10 or more of the previous 20 tax years.

LTRs are subject to UK IHT on worldwide assets, while everyone will be subject to IHT on UK situs assets. Spouse transfers will generally remain 100% exempt.

Abolition of Remittance Basis of Taxation

Another major change to the tax regime which came into effect on 6th April 2025 is the abolition of the remittance basis of taxation and the introduction of a new Foreign Income and Gains (FIG) regime.

From 6th April 2025, a Qualifying New Resident (QNR) is defined as a UK resident who has moved to [or returned to] the UK having been non-UK resident for each of the previous 10 UK tax years.

QNR status will be retained for the first four tax years of UK residence. (Note if you arrive in March, that is one tax year used up). Transitional arrangements are in place. For example, if you arrived in the UK two years ago, you could still qualify for a two-year allowance under the new rules.

Details of the Foreign Income and Gains (FIG) Regime

The FIG regime is only available if you’re a qualifying resident. You’re a qualifying resident if you are a UK tax resident under the statutory residence test (SRT) and still within your first four years as a UK tax resident following at least a 10-year period as a non-UK tax resident. If you make a claim under the FIG regime, you’ll not pay tax on your eligible foreign income and gains.

It's important to note that if you subsequently leave the UK during this four-year period, you won’t be able to claim for the periods that you are temporarily not UK tax resident, or for another four-year period if you return to the UK, but you can claim for any remaining tax years available under the FIG regime if you return.

Implications for Estate Planning

These changes necessitate a review of estate planning strategies. For individuals who are planning to expatriate or maintain non-UK residence for tax purposes, it is essential to establish and maintain 10 full tax years of non-UK residence to remove UK assets from IHT scope. To see how this could benefit you, use our online IHT calculator.

Additionally, seeking repatriation advice can help navigate the complexities of the new FIG regime and ensure compliance with the updated tax regulations.

To schedule an initial consultation with a dual-qualified financial planner, contact us today.

This communication is for information purposes only and does not constitute financial, legal, or tax advice. Please schedule a meeting to receive advice on international financial planning and wealth management.

Last updated 25 June 2025