UK IHT and Domicile: How the Residence-Based Rules Work Since April 2025

Until 5 April 2025, UK inheritance tax was unusual among major economies in using domicile — not residency — as its primary connecting factor. A UK-domiciled individual faced UK IHT at 40% on their worldwide estate regardless of where they lived, while a non-UK-domiciled individual faced UK IHT only on UK-situated assets.

This changed fundamentally on 6 April 2025. The UK abolished domicile as the connecting factor for IHT (alongside the abolition of the non-dom regime and the remittance basis for income tax and CGT) and replaced it with a residence-based test. From that date, an individual who is a "long-term UK resident" — broadly, UK-resident for 10 of the last 20 tax years — is within the scope of UK IHT on their worldwide estate. An individual who is not a long-term UK resident is exposed to UK IHT only on UK-situated assets. Domicile, the domicile of origin, and the former 15-of-20 "deemed domicile" rule no longer determine IHT liability.

The potential saving from falling outside the worldwide charge remains substantial. A £20 million estate held outside the UK by a long-term UK resident carries a UK IHT exposure of approximately £8 million; the same estate, once the individual is no longer a long-term UK resident, would have no UK IHT on the non-UK portion. The financial incentive to manage UK residence history — for those who have genuinely left the UK permanently — is one of the most powerful in the entire UK tax system.

Domicile concepts remain relevant background — they still inform some private-international-law questions and pre-April-2025 history — but they are no longer the test for IHT. The sections below first explain the residence-based rules that apply in 2026, then summarise the domicile concepts (now of reduced significance) for context.

The UK Domicile of Origin (Background — No Longer the IHT Test)

The following sections explain domicile because the concept still arises in succession and conflict-of-laws contexts and governed IHT for events before 6 April 2025. For IHT on deaths and chargeable events from 6 April 2025 onward, residence history, not domicile, is the test (see the long-term UK resident charge above).

Under English private international law, every person acquires a domicile of origin at birth — typically the domicile of their father (or mother, if the parents are not married) at the time of birth. For most UK-born individuals, this is a UK domicile of origin.

The domicile of origin has a unique characteristic: it revives if a domicile of choice is abandoned without a new one being acquired. This means that an individual who changes domicile to France, then moves to the UAE without establishing a new domicile of choice there, automatically reverts to their UK domicile of origin. The UK domicile "clings" in a way that no other domicile concept does.

Acquiring a Domicile of Choice

To displace the UK domicile of origin, you must acquire a domicile of choice in another country. This requires two simultaneous elements:

1. Physical presence: you must actually reside in the new country
2. Intention: you must intend to make that country your permanent home for the indefinite future — "for the rest of your days" in the classic phrase

Both elements must be present simultaneously. Neither is sufficient alone. A person who moves to Dubai but privately intends to retire to the UK has not acquired a UAE domicile of choice. A person who genuinely intends to stay in Dubai forever but has not actually moved there cannot have acquired a UAE domicile.

What HMRC Tests

When a UK-domiciled individual's estate is assessed for IHT and a domicile of choice is claimed, HMRC examines the full factual record of the individual's life after leaving the UK. The questions HMRC asks include:

Where was the permanent home? The most important question. Did the individual own a permanent home in the new country? Did they sell the UK home, or retain it? Retaining the UK home is heavily indicative of an intention to return. Owning a long-term property in the new jurisdiction, particularly one that is furnished and maintained as a permanent residence, is strong evidence of genuine domicile change.

Where were the significant social ties? Club memberships, regular social activities, community participation, church or mosque attendance, friendships — the texture of everyday life. If the individual's social world continued to revolve around the UK, their claimed overseas domicile is weakened.

Where were the financial interests centred? UK-based investments, UK bank accounts, retained ownership of UK business interests — these do not preclude a domicile change but require explanation and, ideally, reduction over time.

Where did the individual express a wish to die? The will (particularly if governed by the law of the new domicile jurisdiction), funeral preferences, burial or cremation location, and any written or spoken expressions of intent are all evidential.

Where were the children educated? Children at school in the UK is evidence of ongoing UK ties; children relocated to schools in the new country is evidence of permanent commitment.

What did the individual say? Letters, emails, conversations recorded in witness statements after death — any statements the individual made about their intentions are relevant. Consistent statements of permanent commitment to the new country strengthen the claim.

Actions That Support a Domicile Change

The following concrete steps, taken together, build the evidential case for a successful domicile of choice:

• Sell the UK family home (or convert it to a purely investment property managed by agents, not occupied by the family). Retaining the "family home" in the UK is the single most damaging fact in a domicile claim.
• Purchase a permanent home in the new jurisdiction as an owner-occupier, furnished and used as the primary residence.
• Update the will to be governed by the law of the new jurisdiction, expressing the testator's domicile explicitly.
• Register with a local doctor, dentist, and other service providers in the new country as a local resident.
• Join local clubs, community organisations, and religious institutions in the new country.
• Move significant investments and banking relationships to the new jurisdiction or at least away from a UK focus.
• Write to HMRC explaining the departure and the intention to establish domicile abroad (though HMRC will form its own view on the facts; this does not bind them).
• Keep records of all of the above, in a form that your executors can produce to HMRC after your death. The domicile claim is tested on your death when you cannot give evidence yourself — the contemporaneous record you create is the evidence your estate will rely on.

The Old Deemed Domicile Rule (Abolished 6 April 2025)

For completeness — and because it still governs historical positions and pre-April-2025 events — UK tax legislation previously imposed a deemed domicile rule for IHT. Under that rule, an individual was deemed UK-domiciled for IHT if they had been UK-resident for 15 of the last 20 tax years, even where they had acquired a domicile of choice overseas as a matter of English law.

This deemed domicile rule was abolished for IHT from 6 April 2025 and replaced by the long-term UK resident test described above. It is no longer the operative test for any death or chargeable event on or after that date. References to the 15-of-20 "deemed domicile" test as a current rule are out of date; the equivalent — and now decisive — question is whether the individual is a long-term UK resident (UK-resident for 10 of the last 20 tax years). The remaining sections explain that residence-based test in detail.

The Long-Term UK Resident IHT Charge (the Current Test)

From 6 April 2025, the residence-based test replaced domicile as the connecting factor for IHT.

Under it, individuals who have been UK resident for 10 or more of the last 20 tax years are subject to UK IHT on their worldwide estate — regardless of their domicile. This is the "long-term UK resident" IHT charge, and it is the test that applies in 2026.

The practical effect: an individual who was resident in the UK for 15 years, has now lived in Dubai for three years, and has successfully changed their domicile to the UAE, is nevertheless subject to UK worldwide IHT under the long-term residency test (because they were UK-resident for more than 10 of the last 20 years).

The "tail" under the new test works as follows: after an individual leaves the UK they remain a long-term UK resident — and so remain within the worldwide IHT charge — for a defined period before falling out of scope on non-UK assets. The length of this tail is graduated: it runs from 3 years (for those resident for 10–13 of the last 20 years) up to a statutory maximum of 10 years for those who were UK-resident for 20 or more of the last 20 years, increasing by one year for each additional year of UK residence within that band.

For individuals who were very long-term UK residents (20+ years) and move overseas, the worldwide IHT tail therefore runs for the full 10 years from departure — the statutory cap — after which the worldwide charge falls away and only UK-situated assets remain within scope. The tail does not extend beyond 10 years however long the prior UK residence.

Coordinating Domicile and Residency Planning

Since 6 April 2025, the IHT analysis for a UK-leaving individual turns on the long-term residency test alone:

• Long-term residency: how many of the last 20 tax years were spent UK-resident? Is the individual UK-resident for 10 or more of those years (and therefore within the worldwide charge)? When will the 10-year threshold cease to be met in the lookback window, and how does the IHT "tail" then taper?

Domicile is no longer the test for IHT, so the old question of whether the domicile of origin has been displaced or the 15/20 deemed domicile rule overcome is no longer determinative. Domicile may still matter for other purposes (for example, certain succession and matrimonial-property conflict-of-laws questions, and historical pre-2025 events), but for IHT the residence history is what counts. Managing the cumulative total of UK-resident years — not just the SRT day count in any single year — is therefore central to IHT planning.

The planning implication: for individuals early in their UK residence, managing the total years of UK residence is important for IHT purposes — not just for the SRT day count, but for the long-term cumulative total.

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UK IHT law, domicile rules, and the post-2025 long-term residency test are complex and depend heavily on individual facts. The rules described here reflect the position as understood at the date of publication. HMRC's approach to domicile claims involves significant factual analysis and may be challenged after death. Nothing in this guide constitutes legal or tax advice. All IHT planning should be undertaken with a qualified solicitor and tax adviser.

How Global Investments Can Help

Global Investments works with UK-leaving individuals and internationally mobile families on long-term IHT planning that coordinates domicile analysis, long-term residency management, and estate structuring. We work alongside specialist tax and trust lawyers to build the evidential record, structure the estate appropriately, and ensure that the IHT planning is robust and well-documented. Contact our team for a confidential review.