UK IHT and the Non-Dom Regime Changes Post-2025

A Watershed Moment for UK Non-Dom Planning

The reforms to the UK's non-domicile regime that took effect from 6 April 2025 represent the most significant change to the taxation of internationally mobile individuals in a generation. The longstanding domicile-based system — under which non-UK domiciliaries could shelter their foreign income, gains, and assets from UK tax — has been substantially replaced by a residence-based framework.

For inheritance tax in particular, the changes are profound. The traditional "domicile" concept, while not entirely abandoned, has been supplemented and in many cases superseded by a new "long-term UK resident" test. The implications for planning — both for those already in the UK and for new arrivals — are significant and, in many cases, urgent.

This guide explains the post-2025 IHT framework for non-doms, identifies the key changes from the previous position, and sets out the planning priorities that should be addressed without delay. All information reflects the legal position as of 2026, but further legislation and HMRC guidance is expected — professional advice is essential.

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The Pre-2025 Position: A Recap

Before 6 April 2025, the key IHT features of the non-dom regime were:

1. Scope of IHT for non-doms: Non-UK domiciled individuals were subject to IHT only on UK-situs assets. Their worldwide non-UK assets were outside scope.

2. Deemed domicile: An individual became deemed UK domiciled for IHT purposes after being resident in the UK for 15 of the preceding 20 tax years. Once deemed domiciled, their worldwide assets came into scope.

3. Excluded property trusts: Non-UK assets settled into offshore discretionary trusts before the settlor became deemed domiciled were "excluded property" — permanently outside UK IHT, even if the settlor later became deemed domiciled.

4. Remittance basis: Non-doms could claim the remittance basis, sheltering foreign income and gains from UK tax unless brought to the UK. (The remittance basis has now been abolished for income and CGT purposes — replaced by the FIG regime — but is still referenced for transitional purposes.)

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The Post-2025 Framework: Key Changes

1. The Long-Term UK Resident (LTUKR) Test Replaces Deemed Domicile

The "deemed domicile after 15 of 20 tax years" rule for IHT has been replaced by a long-term UK resident (LTUKR) test. An individual becomes a long-term UK resident after being UK tax resident for ten years, at which point:

• Their worldwide assets become subject to UK IHT during the period of LTUKR status
• LTUKR status continues for a tail period after leaving the UK — meaning that a person who leaves the UK after becoming LTUKR remains subject to worldwide IHT for a period (currently expected to be ten years for someone who has been UK resident for 20+ years, tapering downwards for shorter periods of prior residence)

The LTUKR status effectively brings more individuals into the worldwide IHT net sooner (ten years versus fifteen), and the tail period extends the UK's reach even after departure.

Key implication: New arrivals in the UK now have a shorter window — potentially only ten years before worldwide IHT exposure begins — in which to complete excluded property trust settlements and other pre-deemed-domicile planning.

2. The FIG Regime (First Four Years)

For individuals who were not UK resident in the ten years immediately preceding their UK arrival, a Foreign Income and Gains (FIG) regime applies for the first four tax years of UK residence. During this period:

• Foreign income and gains are not subject to UK tax (similar to the old remittance basis, but without the charge and without the need to claim)
• No deemed domicile for IHT is acquired during the FIG period

Key implication: New arrivals have a four-year FIG window before normal UK tax rules apply. After the FIG period, foreign income and gains are taxed normally. After ten years, worldwide IHT exposure begins.

3. Excluded Property Trusts: Transitional Protection

For EPTs settled before 6 April 2025 (i.e., before the reform), the government has broadly confirmed transitional protection. The excluded property status of assets settled into qualifying offshore trusts by non-UK domiciliaries before that date is substantially preserved, subject to:

• The assets remaining non-UK situs
• No significant additions or restructuring post-commencement that would taint the excluded property status
• Compliance with ongoing reporting and registration requirements

The precise boundaries of the transitional protection have been the subject of detailed HMRC guidance and professional debate, and ongoing advice is essential for anyone with an existing EPT.

4. New EPT Settlements After 6 April 2025

The ability to settle excluded property trusts has not been entirely removed for new arrivals, but the timing is tighter:

• During the FIG period (first four years of UK residence), assets settled into qualifying offshore trusts are not subject to UK IHT — consistent with the principle that worldwide assets are outside scope during this period
• After the FIG period but before LTUKR status is acquired (i.e., in years 5–10), the position depends on whether the individual is factually non-UK domiciled. If still genuinely non-UK domiciled, excluded property treatment may still apply
• Once LTUKR status is acquired (year 11 onwards), EPT settlement of new assets is subject to the worldwide IHT regime

Key planning priority: New arrivals should settle EPTs as early as possible in their UK residence — ideally during the FIG period — to lock assets out of the LTUKR IHT net before it catches them.

5. UK Real Estate: All Structures In Scope

From 6 April 2025, all UK real estate held through any structure — direct, offshore company, trust, partnership — is within scope of UK IHT for all individuals (not just those above a deemed domicile threshold). The extension to commercial as well as residential UK property was implemented in the reforms. This broadly closes the planning gap that existed when offshore companies held UK real estate.

6. Business Property Relief: Significant Restriction

BPR and APR have been substantially reformed for deaths on or after 6 April 2026:

• The 100% rate of BPR remains for the first £2.5 million of qualifying business assets (unlisted trading company shares and similar). This allowance was originally announced as £1 million in the October 2024 Budget but was raised to £2.5 million in December 2025; it is transferable between spouses and civil partners (up to around £5 million per couple)
• Above £2.5 million, BPR is reduced to 50% (a 20% effective IHT rate)
• AIM-listed shares, previously qualifying for 100% BPR with no monetary cap, now qualify for only 50% BPR and do not use the £2.5 million 100% allowance
• Agricultural property relief is subject to the same £2.5 million / 50% cap structure

For HNW estates with substantial AIM portfolios or business interests that relied on BPR to eliminate IHT, this is a major change requiring urgent review. Many investors in AIM will face a substantially higher IHT bill on the excess above the threshold.

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What Changed, and What Stayed the Same

Feature	Pre-2025	Post-2025
Deemed domicile threshold	15 of 20 years	Replaced by LTUKR after 10 years
FIG regime	Remittance basis (with charge)	Four-year FIG (automatic, no charge)
EPT — existing trusts	Excluded property status	Transitional protection (broadly preserved)
EPT — new settlements	Available before deemed domicile	Available during FIG and early residence; tighter window
UK residential property in trust	In scope since 2017	Extended to all UK real estate
BPR cap	No cap (100% BPR on AIM etc.)	£2.5m at 100%; 50% above that
Domicile concept	Still relevant	Still relevant for non-LTUKR individuals
Spousal exemption (non-dom spouse)	£325,000 cap	Unchanged; election still available

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The Tail: IHT After Leaving the UK

The "tail period" is one of the most practically significant — and least understood — aspects of the new regime. Under the pre-2025 rules, a deemed domiciliary who left the UK lost deemed domicile after three years of non-residence. Under the post-2025 framework, an LTUKR individual who leaves the UK remains subject to worldwide IHT for an extended period.

The length of the tail period is calibrated to the number of years of prior UK residence:

• Ten to fifteen years of UK residence: approximately three to five years' tail
• Twenty or more years: approximately ten years' tail

This means that a long-term UK resident (say, 25 years of UK residence) who leaves the UK faces a worldwide IHT exposure for up to ten years after departure. During that tail period, they must plan their estate carefully to manage the worldwide exposure — EPTs settled before departure preserve their excluded property status, but new assets acquired during the tail period may not benefit.

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Planning Priorities in 2026

For Existing Non-Doms Who Are Already Deemed Domiciled / LTUKR

• Review whether existing EPTs are properly structured and documented to benefit from transitional protection
• Review BPR/APR positions in light of the reformed relief caps
• Consider whether life assurance in trust is appropriate to cover the IHT liability on worldwide assets
• Begin a systematic lifetime gifting programme (PETs, annual exemptions, gifts from income)
• Consider whether the spousal exemption election is appropriate

For Non-Doms Approaching LTUKR Status (Years 7–10)

• Act immediately on EPT settlement — the window is closing
• Review all non-UK assets for suitability for EPT inclusion
• Consider the CGT cost of settling appreciated non-UK assets
• Ensure the trust jurisdiction, trustees, and structure are appropriate

For New Arrivals (Within FIG Period — Years 1–4)

• Consider early EPT settlement during the FIG period
• Understand the LTUKR clock — ten years is closer than it sounds
• Plan the overall structure of UK and non-UK asset holdings
• Ensure UK real estate is understood as in scope for IHT from year one

For Those Planning to Leave the UK

• Understand the tail period applicable based on years of UK residence
• Plan exit timing and asset restructuring to minimise the IHT exposure during the tail
• Take advice on whether departing before LTUKR status is acquired would be beneficial

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Common Mistakes to Avoid

Assuming nothing has changed since 2024. The 2025 reforms are substantial. Planning strategies that worked before may no longer be available or optimal.

Missing the EPT window. Once LTUKR status is acquired, the ability to settle new excluded property into a trust is lost for non-UK assets. This cannot be reversed.

Ignoring the tail. Individuals planning to leave the UK often assume their UK tax exposure ends immediately on departure. Under the LTUKR rules, this is not the case.

Over-relying on BPR. AIM-based IHT planning worked very effectively until 2026. The £2.5 million cap and 50% rate on the excess have fundamentally changed the economics for large AIM portfolios (and AIM shares do not benefit from the £2.5 million 100% allowance in any event).

Not reviewing existing trust structures. EPTs set up before 2025 may require review to ensure they benefit from transitional protection and comply with ongoing reporting obligations.

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How Global Investments Can Help

Global Investments has deep expertise in non-dom and IHT planning, and we have been advising clients through the 2025 reforms and their implications from the outset.

We can:

• Review your current position against the new LTUKR rules
• Identify urgent planning steps before further windows close
• Design and implement EPT structures appropriate for the post-2025 regime
• Coordinate with specialist UK tax counsel and offshore trust advisers
• Review your BPR position and alternative IHT mitigation strategies

The reforms make professional advice more important than ever. Contact us for a confidential review.

This guide is for general information only and does not constitute tax or legal advice. The non-dom reforms are complex, still being interpreted, and subject to further change. Always seek specialist professional advice tailored to your circumstances before acting. As of 2026.