UK Inheritance Tax on Overseas Assets After the 2025 Residence-Based Tax Reforms

Misunderstanding the interaction between residence history, domicile status, and transitional rules regularly leads to unexpected and avoidable tax liabilities for families with international assets.

• The UK transitioned from a domicile-based system to a residence-based system for Inheritance Tax from 6 April 2025.
• Long-term UK residents can be subject to UK Inheritance Tax on worldwide assets, even if they are not UK-domiciled.
• UK-situated assets remain within UK Inheritance Tax for non-residents and non-long-term residents.
• If you leave the UK for more than 10 years and are classified as a non-UK tax resident for that period, then only your UK assets will be liable for UK inheritance tax.
• The four-year Foreign Income and Gains (FIG) regime applies to income and capital gains tax only, not Inheritance Tax.
• Overseas assets require coordinated UK and local tax planning to prevent double taxation and structural inefficiencies.

Residency determines where income tax and capital gains tax are paid under the Statutory Residence Test.

From April 2025, residence history also plays a key role in determining exposure to UK Inheritance Tax.

Residency alone does not automatically bring worldwide assets into scope, but long-term UK residence can do so.

Domicile reflects where an individual considers their permanent home to be.

Under the historic regime, UK domicile brought worldwide assets into the UK Inheritance Tax net.

Following the reforms introduced from 6 April 2025, domicile is becoming less central for inheritance tax purposes, although it may still be relevant in transitional cases and existing planning structures.

Under the new regime, individuals who have been a UK resident for at least 10 of the previous 20 tax years are treated as long-term UK residents for Inheritance Tax purposes.

Long-term residents are generally subject to UK Inheritance Tax on their worldwide estate, including overseas assets.

Individuals who leave the UK may remain within the UK inheritance tax scope for a period after departure under temporary non-residence rules.

Under the new framework:

• Long-term UK residence determines whether worldwide assets fall within the UK inheritance tax net
• UK-situated assets remain taxable regardless of residence

Yes, in many circumstances overseas assets can be subject to UK Inheritance Tax.

Under the current regime:

• Long-term UK residents are generally subject to UK Inheritance Tax on worldwide assets, including foreign property, overseas bank accounts, investment portfolios, and interests in overseas companies. 
• Individuals who are not long-term UK residents are typically subject to UK Inheritance Tax only on UK-situated assets.

This represents a shift from the previous system where exposure depended primarily on domicile or deemed domicile status.

Not immediately.

Leaving the UK does not automatically remove exposure to UK Inheritance Tax.

Individuals who have been long-term UK residents may remain within the UK inheritance tax regime for a period after departure under temporary non-residence rules.

Reducing UK inheritance tax exposure typically requires:

• breaking long-term UK residence status over time
• establishing sustained residence elsewhere
• coordinating succession planning across jurisdictions.

This process can take multiple years and requires careful evidential support.

To clarify, If you leave the UK for more than 10 years and are classified as a non-UK tax resident for that period, then only your UK assets will be liable for UK inheritance tax.

Trusts can remove assets from an estate if structured correctly and sufficient time passes.

Key points:

• Chargeable Lifetime transfers into most trusts above the available nil-rate band can trigger an immediate 20 percent charge.
• Assets may fall outside the estate after seven years, subject to survival and ongoing trust charges.
• Trust treatment varies significantly across jurisdictions. Some countries treat trust property as personally owned for tax purposes.
• UK reliefs such as business relief may not be recognised overseas.
• Trust planning requires coordinated legal and tax analysis across all relevant jurisdictions.

Family Investment Companies can support long-term succession and control where overseas assets are involved.

Key characteristics:

• Assets or cash are introduced into a corporate structure.
• Growth occurs within a corporate tax environment.
• Shares can be transferred gradually to the next generation while voting control is retained.
• Inheritance Tax outcomes depend on share rights, valuation, and timing.

FICs are not a universal solution. Their effectiveness depends on asset type, jurisdiction, and family objectives.

The UK has Inheritance Tax treaties with a limited number of countries.

Where treaties exist, relief mechanisms are available to prevent double taxation.

Where no treaty exists, the UK generally allows unilateral relief, crediting foreign death taxes against UK inheritance tax liabilities, subject to limits.

Coordinated advice between UK advisers and overseas specialists is essential to ensure relief is properly claimed and planning structures remain effective across jurisdictions.

The most common misunderstanding is assuming that overseas assets sit outside the UK tax system.

Under the current framework, Inheritance Tax exposure follows residence history and asset location, not simply geography.

Another frequent mistake is implementing structures that work under UK law but fail under local foreign tax rules. This can create additional tax exposure instead of reducing it.

• Confirm long-term residence status under the new UK rules.
• Map all overseas assets by jurisdiction and ownership structure.
• Review local succession and death taxes alongside UK inheritance tax exposure.
• Stress-test trusts and company structures under foreign law.
• Align wills, shareholder agreements, and succession planning across jurisdictions.
• Review planning regularly as residence history changes.
• Consult with us if you want clarity on your situation.

• Assuming residency alone determines inheritance tax exposure.
• Using trusts without understanding local recognition rules.
• Relying on generic online structures for complex cross-border estates.
• Failing to coordinate UK and overseas advisers.
• Delaying planning until long-term residence rules apply.

Overseas assets can fall within the UK Inheritance Tax system when individuals become long-term UK residents or hold UK-situated property.

The move from a domicile-based system to a residence-based regime from April 2025 means many internationally mobile families must reassess their inheritance tax exposure.

Effective planning requires early action, technical precision, and coordinated UK and international advice. Each jurisdiction, asset class, and family structure requires a carefully tailored strategy.

If you need any help or advice in this complex area please contact us as soon as possible.

Disclaimer. The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. UK tax legislation changes frequently, and the specific application of any rule or strategy depends on individual circumstances. Figures, thresholds, and reliefs mentioned are correct as of the 2026 to 2027 tax year unless otherwise stated. Before acting on any information here, consult a qualified adviser who has reviewed your full situation. Bluebond Tax Planning provides personal recommendations only under a signed client agreement, following a full review. Bluebond Tax Planning operates under UK legal frameworks and recognised professional conduct standards. Tax planning and legal work are not FCA regulated.