Inheritance tax and long term UK residence

Since 6 April 2025 inheritance tax on assets outside the UK depends on whether a person is a long term UK resident, meaning UK resident for at least 10 of the previous 20 tax years, rather than on domicile. A long term UK resident is taxed on worldwide assets, while anyone else is taxed only on UK assets, which for this purpose include UK homes and, from 6 April 2026, UK agricultural property held through overseas companies. Someone who leaves the UK stays within the charge for between three and ten tax years.

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What changed on 6 April 2025?

Inheritance tax used to ask where a person was domiciled. Finance Act 2025 replaced that with a residence based test, inserting sections 6A to 6C into the Inheritance Tax Act 1984 (IHTA 1984) with effect from 6 April 2025. Section 6(1) now says that property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual who is not a long term UK resident. Excluded property is left out of the estate and out of any lifetime transfer, so the whole question of whether foreign assets are taxed turns on this one status.

HMRC’s Inheritance Tax Manual at IHTM47001 explains that domicile has not disappeared completely. It still decides the position for deaths and lifetime transfers before 6 April 2025, for double taxation conventions that use the common law concept of domicile, and for some trust charges where the settlor died before 6 April 2025 or a transitional rule applies.

How does the 10 out of 20 year test work?

Section 6A(1) says an individual is a long term UK resident at all times in a tax year if they were UK resident for at least 10 of the previous 20 tax years. The year being tested is the tax year in which the death or other chargeable event happens, and the count looks only at the 20 years before it.

Residence for each year follows income tax. Section 6A(5) applies the old income tax rules up to 2012 to 2013, and the statutory residence test in Schedule 45 to Finance Act 2013 for later years. HMRC confirms at IHTM47020 that a split year under the statutory residence test counts as a full year of UK residence for inheritance tax, and that the test applies whatever the person’s common law domicile.

The status applies “at all times” in the tax year, so it does not change part way through a year. Someone who arrives in the UK on 1 May and dies in February of their eleventh year of residence is judged on the 20 tax years before that year, not on the date of death.

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How long does someone stay in scope after leaving the UK?

Section 6A(2) ends long term UK residence in two situations. The first is where the person was non UK resident for any 10 consecutive tax years in the 19 years before the current year, which resets the test. The second is a shorter tail that depends on how long the person lived in the UK. Section 6A(3) takes the 20 tax years ending with the last year of UK residence, counts the resident years, and sets the number of consecutive non resident years needed before the status falls away.

UK resident years in the 20 ending with the last resident year	Consecutive non resident years needed
13 or fewer	3
14	4
15	5
16	6
17	7
18	8
19	9
20	10

HMRC’s own examples at IHTM47020 show how this plays out. Someone resident for 11 years remains in scope for three years after leaving. Someone resident for 30 successive years remains in scope for the maximum ten. In HMRC’s example of Jakub, who was resident for 18 of the 20 years ending with 2026 to 2027 and then moved abroad, he stays a long term UK resident until eight consecutive non resident years have passed, so a death in 2031 to 2032 still brings his worldwide estate into charge.

Which assets outside the UK fall within the charge?

For a long term UK resident, all property owned outright is within inheritance tax wherever it is situated (IHTM04260). For someone who is not, foreign assets are excluded property, and so are holdings in UK authorised unit trusts and open ended investment companies under section 6(1A) (IHTM04262).

There is an important limit. Section 6(5) makes the excluded property rule subject to Schedule A1. Since 6 April 2017, the value of an interest in a foreign close company or foreign partnership that is attributable to UK residential property is not excluded property, and nor are loans used to buy, maintain or improve UK homes or the collateral for them. HMRC’s guidance at IHTM04311 records that Finance Act 2026 extended Schedule A1 to UK agricultural property from 6 April 2026. So a person who is not a long term UK resident can still face inheritance tax on a London flat or a farm held through an overseas company.

How are trusts affected?

The new test also governs settled property. Under the rules described at IHTM47050, foreign assets in a trust are excluded property only at times when the settlor is not a long term UK resident, regardless of when they were added. If the settlor dies on or after 6 April 2025, their status immediately before death fixes the position for the rest of the trust’s life. If the settlor died before that date, the old test applies, looking at the settlor’s domicile when the property was added.

For relevant property trusts, HMRC explains at IHTM47052 that a ten year anniversary charge of up to 6% arises when the settlor is a long term UK resident, reduced to reflect any part of the ten years when the assets were excluded property. A proportionate exit charge arises when the settlor stops being a long term UK resident, because the foreign assets then cease to be relevant property. Where someone has a qualifying interest in possession, both the settlor and the beneficiary must be non long term residents for the property to be excluded (IHTM47051). If the settlor can benefit, the gifts with reservation rules may also apply; see our page on gifts with reservation of benefit.

What transitional rules apply to people who had already left?

IHTM47021 sets out a transitional rule for people who were not UK domiciled under common law on 30 October 2024 and who are non UK resident in 2025 to 2026. For them, long term residence is tested using the old deemed domicile test: resident for at least 15 of the previous 20 tax years and for at least one of the four tax years ending with the relevant year. In practice this means:

someone who was neither domiciled nor deemed domiciled on 30 October 2024 and is non resident in 2025 to 2026 is not a long term UK resident;
someone who was deemed domiciled on 30 October 2024 and is non resident in 2025 to 2026 remains a long term UK resident until the start of their fourth year of non residence;
anyone who returns and becomes UK resident again from 2026 to 2027 is tested under the normal 10 out of 20 rule, counting earlier years of residence.

The transitional rule does not help someone who was UK domiciled under common law on 30 October 2024. HMRC’s example of Nicholas, a UK domiciliary who left in 2009 to 2010, shows that he is simply tested under the new rule and, having been abroad for well over ten years, is outside the charge on his foreign assets.

Are there special rules for children, spouses and treaties?

Section 6B modifies the test for anyone under 20. A young person is a long term UK resident if they were UK resident for at least half of the whole tax years since birth, rounded up, and nobody is a long term UK resident in a year if they were under one immediately before it (IHTM47024).

A spouse or civil partner who is not a long term UK resident can elect under sections 267ZC to 267ZE to be treated as one. The main reason to do so is to remove the cap on the spouse exemption, explained on our page on the non UK spouse exemption.

The UK has 10 estate and gift tax treaties (IHTM47070). Where a treaty works by reference to deemed domicile, a long term UK resident is treated as UK domiciled, but status gained only through an election is disregarded under section 267ZF(3) and (4).

What mistakes come up in practice?

Counting residence from the date of arrival rather than in whole tax years, or forgetting that a split year counts as a full year.
Assuming foreign assets drop out of charge as soon as a client emigrates. The tail can run for up to ten tax years.
Treating overseas companies that own UK homes or, from 6 April 2026, UK farmland as safely outside inheritance tax.
Treating a trust’s excluded property status as fixed when the trust was made. It now moves with the living settlor’s status and can trigger ten year and exit charges.
Ignoring domicile entirely. It still governs older deaths and some treaty claims.

Once the status is settled, the estate is reported on the IHT400 in the usual way; see completing the IHT400 and our guide to the inheritance tax nil rate band. For the separate capital gains rule for people who return after a short spell abroad, see temporary non residence.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.