UK inheritance tax after April 2025: what changed and what to do

In April 2025 the UK stopped asking where your permanent home is and started asking how long you've lived here. It was the biggest change to inheritance taxInheritance tax (IHT)Tax on what you leave behind when you die. In the UK it now follows long-term residence rather than domicile. in a generation. A lot of planning done before 2025 no longer works, and some of it now does active harm.

How does the new test work?

You're a "long-term residentLong-term UK residentThe UK status that decides whether your worldwide estate is in scope for UK inheritance tax, based on how many past years you were UK resident." if you've been UK-resident for at least ten of the previous twenty tax years. If so, UK inheritance tax (the tax on what you leave when you die) can reach your assets everywhere in the world, not just in the UK.

Leave the UK and the exposure doesn't stop at once. A tail of up to ten years applies, and it gets longer the longer you were resident.

If you're a non-resident who doesn't meet the test, only assets located in the UK are exposed. UK residential property stays within scope however it's held.

What stopped working?

Three popular approaches have broken.

Excluded property trusts. The old certainty was that if you set up the trust before you acquired "deemed domicile" (the old rule that treated long-time residents as UK-domiciled), the trust sat outside the tax net permanently. That no longer holds. Trust property now moves in and out of the "relevant property" charges as the person who set up the trust (the settlor) gains or loses long-term-resident status. Existing trusts need re-testing. Several will face ten-year charges and exit charges that nobody planned for.

Domicile-based arguments. Evidence of foreign domicile, such as a foreign burial plot or a home you kept overseas, no longer decides the outcome. Day counts do.

Arrive-and-forget planning. The ten-year clock keeps running whether or not you're watching it. Families who arrived in 2017 crossed the line in 2027 without a single letter to tell them. HMRC doesn't send a card.

Where are the grey areas?

Most of the new regime is mechanical: you count years and the answer follows. The unsettled parts are the old trusts, the 2026 relief reforms and the paperwork behind gifts.

What still works?

Quite a lot. The test is mechanical, and that cuts both ways: you can plan it with precision.

• Timing of arrival and departure. Departure dates, split-yearSplit-year treatmentA UK rule that can split the tax year in two when you arrive or leave, so you're only taxed as UK resident for part of it. treatment (when the tax year is split into a UK part and an overseas part) and the tail calculation can all be planned precisely.
• Lifetime giving. Potentially exempt transfers (gifts that drop out of the tax net if you live seven years) survive, with the seven-year taper. Regular gifts out of surplus income remain one of the most under-used reliefs in the code. Keep a contemporaneous record of your income and spending, or the gifts may not survive a challenge.
• Business and agricultural relief. These are subject to the reforms announced for 2026, which cap full relief and apply a reduced rate above the cap. Testing whether the business counts as trading matters more than ever.
• Life assurance in trust. Where a bill is unavoidable, whole-of-life cover written in trust turns an illiquid tax bill (one you'd have to sell assets to pay) into a funded one. Underwriting gets harder every year you wait.
• Spousal planning. That includes the transferable nil-rate band (a spouse's unused tax-free allowance passing to the survivor), and the rules where one spouse isn't long-term resident.

Why do wills matter as much as tax?

Tax is only one system, and succession law is the forgotten half. Forced heirship (rules that reserve a share of your estate for certain relatives) applies in France, Spain and much of the Gulf. Sharia succession applies in several jurisdictions. Either can override your will, whatever it says.

The EU Succession Regulation lets you elect for the law of your nationality in participating states. The election must be made expressly in the will, and it changes who inherits, not the tax.

If you have assets in three or more countries, you usually need coordinated wills. Each should cover only its own country's assets, and none should revoke the others. We have seen more distress caused by two wills that revoked each other than by any tax charge.

What should you do, and in what order?

Work through five steps. The order matters.

Most families find the leftover tax number is smaller than they feared and the paperwork risk is bigger. Both are fixable, but only while everyone involved still has capacity (the mental ability to make decisions) and can still travel.