Watch/Listen to Laura and SImon explain the current situation.

A quiet revolution in UK tax law is shaking the foundations of inheritance planning for expats and international investors.

You may have heard a lot about the UK’s recent tax changes around non-doms, especially the abolition of the domicile-based system. But amid the headlines about worldwide income and remittance rules, one part of the reform has been flying under the radar:

UK Inheritance Tax is no longer based on domicile. It’s now based on long-term residence.

And this matters a lot.

From 'Domicile' to 'Residence': A Major Shift in Liability

Under the old system, your global estate only became subject to UK Inheritance Tax (IHT) if you were deemed UK-domiciled. That typically meant 15 out of 20 years of UK tax residence. Even then, there were workarounds, like offshore trusts created before you were deemed domiciled.

But from 6 April 2025, it’s all change:

• New Rule: If you’ve been UK resident for 10 of the previous 20 tax years, you are now liable to UK IHT on your worldwide assets.

• If you’ve been non-resident for 10 of the last 20 years, you’re only liable on UK-based assets.

This brings UK IHT into line with the wider shift away from domicile, but also creates major planning headaches, especially for globally mobile individuals who live in countries where inheritance tax doesn’t exist at all.

Why This Is a Problem for Expats and Non-Doms

For many high-net-worth individuals, the UK’s IHT rules are already seen as punitive. With a flat 40% tax on estates above the nil-rate band, the stakes are high.

What’s more, countries like Italy, France, and even the UAE have become more attractive by comparison, some with no IHT, or with generous exemptions.

Business figures like Nassef Sawiris and Lakshmi Mittal have openly cited UK inheritance tax as a factor in relocating. If you're holding shares in a billion-pound company, the UK could now lay claim to 40% of that wealth, even if you live abroad, provided you meet the residence conditions.

Will Labour Change It Again?

There are whispers. Reports suggest the Labour government may now be reconsidering aspects of the non-dom reforms, particularly under pressure from financial institutions and global investors.

But whether they U-turn or not, the shift from domicile to residence has already been legislated and it means anyone with long-term UK ties needs to reconsider their estate planning urgently.

What Should You Do Now?

If you’re a UK expat, international worker, or non-dom with UK links:

1. Review your UK tax residence history.
2. Reassess your exposure to UK inheritance tax.
3. Explore trust structures and reliefs but make sure they still work under the new rules.
4. Act now, before further changes limit planning options.

Need expert advice? At LSR Partners, we help you pay the right tax in the right place at the right time. Whether you’re based in the UK or abroad, we’ll help you navigate the new rules with clarity and confidence.

Get in touch today for a confidential, no-obligation chat.