UK Inheritance Tax Planning for Expatriates
The April 2025 Long-Term Resident rules changed UK inheritance tax exposure for thousands of expats. We help you understand your position and reduce your liability.
UK inheritance tax (IHT) applies at 40% to estates above the applicable allowances. For expatriates, the critical question is whether your worldwide assets, or only your UK assets, are subject to IHT. From 6 April 2025, this is determined by the Long-Term Resident (LTR) test, not domicile.
Who Is Affected by UK Inheritance Tax?
UK inheritance tax applies to individuals who die with estates above the nil rate band (£325,000). From 6 April 2025, the key determinant for expatriates is Long-Term Resident (LTR) status. If you have been UK tax resident for 10 or more years in the last 20 years at the time of death, your worldwide assets are subject to UK IHT. If you are a non-LTR, only UK-situs assets (such as UK property, UK bank accounts, and UK shares) are within scope.
How Is the Nil Rate Band Applied?
Every individual has a nil rate band of £325,000, the amount of estate on which no IHT is charged. Where a UK residential property passes to direct descendants, an additional residence nil rate band (RNRB) of £175,000 may apply, giving a combined allowance of £500,000. These allowances can be transferred between spouses and civil partners, potentially creating a combined allowance of up to £1,000,000 for a surviving spouse. The RNRB tapers at £1 for every £2 of taxable estate above £2 million.
Spouse and Civil Partner Exemptions
Transfers between spouses and civil partners are generally exempt from IHT. However, if the recipient spouse is non-UK domiciled (and not yet a Long-Term Resident), the exemption is capped at £325,000. Under the new LTR framework, this cap applies where the deceased was an LTR but the surviving spouse is not yet an LTR. Careful pre-death planning can address this.
Planning Strategies We Advise On
There are several legitimate strategies available to reduce IHT exposure: making annual gifts (up to £3,000 per year), making Potentially Exempt Transfers (PETs, gifts that fall outside the estate after seven years), establishing trusts, holding assets that attract Business Property Relief (BPR) at 100% or 50%, and using life insurance written in trust. Our approach is to understand your full estate picture and recommend proportionate, practical steps.
Estimate your IHT liability
Use our free calculator to see your estimated inheritance tax exposure based on your Long-Term Resident status and estate value.
Open IHT CalculatorFrequently Asked Questions
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