International inheritance tax: the 10-of-20-year rule, the tail and overseas assets

A long-term UK resident is someone who has been UK resident for at least 10 of the 20 tax years immediately before the tax year in which a chargeable event happens, including death. If you meet the test, your worldwide assets are within the scope of UK inheritance tax. If you do not, only your UK assets are. The test applies from 6 April 2025 and replaces the old domicile approach.

Not for the main charge. From 6 April 2025, deemed domicile is replaced by long-term UK residence. Transitional rules protect some people who were deemed domiciled on 30 October 2024 and have left, and who remain in scope until the start of their fourth year of non-residence. Domicile still matters for which country's succession law applies to your will, which is a separate question.

If you were a long-term resident and then leave, you stay in scope for a tail based on how many of the previous 20 tax years you were UK resident. Ten to 13 years gives three years. Fourteen gives four, fifteen gives five, sixteen six, seventeen seven, eighteen eight, nineteen nine, and twenty gives ten.

Yes. A person is not treated as a long-term UK resident in a year after they have been non-resident for ten consecutive tax years, even if they later return. The test is effectively reset, and the same ten-year period lines up with the FIG regime qualification. A shorter absence does not reset anything, though the tail may end earlier if you did not stay long enough.

If you are a long-term UK resident, yes, in principle. Non-UK property, bank accounts, shares and businesses count towards your estate at the same 40% rate, above the nil-rate band. If you are not long-term resident, only UK-situs assets are charged. The situs, or location, of an asset can be a technical question, and double tax relief may reduce the combined charge.

The standard rate is 40% on the value above the nil-rate band of £325,000, or 36% where at least 10% of the net estate goes to charity. A residence nil-rate band of £175,000 may apply to a home passing to direct descendants, tapering away above £2m. Unused allowances can transfer between spouses. The thresholds are frozen up to and including 2030/31.

Foreign assets in a trust are excluded property, and so outside UK inheritance tax, only if the settlor was not a long-term UK resident at the time of the chargeable event, for settlors alive on or after 6 April 2025. For a deceased settlor, the test is residence immediately before death. For some interest in possession trusts, the life tenant's residence matters too. Previously the test turned on domicile when the assets were settled.

Trusts set up by non-UK domiciled settlors with foreign assets were often outside inheritance tax. Under the new rules, if the settlor is long-term UK resident, the foreign assets are no longer excluded property, and the trust can face entry, ten-yearly and exit charges. Transitional rules protect some assets that were excluded property at 30 October 2024, so every trust needs an individual review.

Not if you are a long-term UK resident. Settling non-UK assets into trust while you are within the long-term residence net does not make them excluded property, and entry charges, ten-yearly charges and exit charges can arise on relevant property trusts. Planning must use the right structure at the right time. Gifts into trust may also be treated as gifts with reservation if you benefit.

The spouse exemption is unlimited when both spouses are long-term UK residents, when neither is, or when a non-long-term-resident transfers to a long-term-resident spouse. It is limited to the nil-rate band, currently £325,000, if a long-term resident transfers to a spouse who is not. The spouse who is not long-term resident can elect to be treated as long-term resident, an election that cannot be revoked.

It lets a spouse or civil partner who is not long-term UK resident choose to be treated as if they were, which can unlock the unlimited spouse exemption on a transfer from their long-term resident spouse. The price is that the electing spouse's worldwide assets are also brought into UK inheritance tax. It cannot be revoked, and it lapses only after ten consecutive years of non-residence.

Only a few. The UK has inheritance tax conventions with the Republic of Ireland, South Africa, the USA, the Netherlands, Sweden and Switzerland, and older treaties with France, Italy, India and Pakistan that work differently. Most countries, including the UAE and Saudi Arabia, are not on the list. Where there is no treaty, UK unilateral relief can give credit for foreign inheritance tax on assets located abroad.

Relief usually comes as a credit. Where a treaty applies, it decides which country taxes which asset and which gives credit. Where none does, HMRC gives credit against UK inheritance tax for tax charged by another country on assets located in that country, limited to the UK tax on that asset. You need to consider the foreign tax rules too, which is why we work with local advisers.

Sometimes, but not always. Many countries apply their own succession law to local property, such as forced heirship rules, and may require a local will or probate. A UK will may need to be coordinated with a separate foreign will so that one does not revoke the other. We work with your overseas lawyers so your wills and tax plans fit together.

It often can. A whole-of-life policy written in trust can provide cash to pay the inheritance tax without forcing the sale of overseas assets, and the proceeds fall outside the estate if the trust is set up correctly. Premiums may be covered by the exemption for normal expenditure out of income, or treated as gifts. The right design depends on your age, health, residence and the trust type used.

Leaving does not end exposure immediately. If you are a long-term UK resident, your worldwide assets remain in scope for three to ten years, depending on your residence history. Planning combines the timing of departure, lifetime gifts, trusts, life cover and business or agricultural reliefs where they apply. We model the cost and the benefit with you before you decide whether to move.

Yes. From 6 April 2027, most unused pension funds and death benefits come into the estate for inheritance tax. 100% business and agricultural property relief is capped for qualifying property from 6 April 2026 at £2.5m per person, with 50% relief above that. These apply to UK-resident and long-term-resident estates alike, so international families need to include them in their planning.