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Case Study: Structuring a UK Estate for Long-Term Succession
Hoxton Tax • Case Study: Structuring a UK Estate for Long-Term Succession
Inheritance Tax
For international clients, UK Inheritance Tax (IHT) is driven by an individual’s connection to the UK, rather than citizenship or nationality.
As a starting point, it is important to note that UK-situated assets have always remained within the scope of UK IHT, regardless of where an individual lives or their wider circumstances.
Historically, exposure to IHT on a worldwide estate was determined by domicile, including deemed domicile rules. However, from 6 April 2025, the UK has moved towards a framework based on long-term residence (LTR), shifting the focus towards time spent in the UK, as a UK resident, over the individuals previous 20 year period.
Depending on your position, this can result in exposure to IHT on either UK assets alone or your worldwide estate, with the position evolving over time as your connection to the UK changes.
Given the interaction between residence, domicile, and the evolving LTR rules, understanding your position is critical. The extent of exposure, availability of reliefs and planning opportunities can vary significantly depending on your personal and family circumstances.
How does this impact you?
Yes. Leaving the UK does not automatically remove exposure to UK IHT.
UK-situated assets remain within the scope of UK IHT in all cases, regardless of where you live. In addition, your broader exposure must be considered under the Long-Term Residence (LTR) framework, which can bring your worldwide estate within scope depending on your residence history.
Importantly, this is not a fixed position and should be reviewed regularly as your circumstances evolve.
Historically, UK IHT exposure on a worldwide estate was determined by domicile, including deemed domicile rules.
While the UK has moved towards a Long-Term Residence (LTR) framework from 6 April 2025, domicile can still remain relevant—particularly in the context of trusts established prior to 30 October 2024, where historic rules may continue to have an impact.
This depends on your Long-Term Residence (LTR) status.
Individuals who are not long-term resident are typically subject to IHT on UK assets only
Individuals who are long-term resident may be subject to IHT on their worldwide estate
Your position is determined by your UK residence history and can change over time.
The current framework is based on UK residence under the Statutory Residence Test, which in turn determines whether an individual is considered long-term resident.
Once an individual becomes long-term resident, they may remain within the scope of UK IHT on a worldwide basis for up to 10 years after becoming non-UK resident. This extended exposure is often referred to as the “tail”. However, for some individuals this will be as little as 3 years.
Understanding when this applies is critical when planning a move away from the UK.
Spousal exemptions are often heavily relied upon in IHT planning. However, where spouses have different LTR positions, the availability of this exemption can be significantly restricted.
In some cases, the exemption may be limited to £325,000, which can materially impact IHT exposure, succession planning, and cash flow on death.
It is possible for a non-long-term resident spouse to elect to be treated as long-term resident, but this brings wider and ongoing consequences. Advice should always be sought before making such an election.
Overseas trusts can play an important role in succession planning, control, and long-term wealth structuring, but they do not automatically remove IHT exposure.
Their effectiveness depends on:
- When the trust was established
- Your LTR status at the time
- Your future LTR position
- The nature of the assets held
Careful planning is required to ensure the structure remains effective over time.
The UK has entered into a limited number of estate (inheritance tax) treaties with other jurisdictions.
Where assets are held outside the UK, it is important to first consider which jurisdiction has primary taxing rights. Only then can the application of any relevant treaty be assessed.
Treaties can help prevent double taxation, but their availability and effectiveness vary depending on the countries involved, and often involve steps being taken to secure the relief rather than it automatically applying.
Planning should take a joined-up, long-term approach, reflecting both current circumstances and future movements.
It is also important to understand how different jurisdictions tax wealth, as approaches can vary significantly:
Some tax assets on death
Some tax lifetime gifts
Others tax the recipient of wealth
Effective planning therefore requires a holistic view across all relevant taxes and jurisdictions, aligned to the family’s long-term objectives.
The focus should always be on what you are ultimately trying to achieve, with structures and strategies designed to support that outcome over time.
Why Hoxton?
Inheritance Tax, particularly in an international context, requires more than technical knowledge. It requires clarity, coordination, and long-term thinking.
At Hoxton Tax, we provide clear, practical advice grounded in real-world experience of internationally mobile clients. Where appropriate, we work alongside Hoxton Legal to ensure structures are not only technically robust, but also properly implemented.
Our focus is simple: to help you understand your position, make informed decisions, and plan with confidence.
We help clients:
• Assessing UK inheritance tax exposure for non-UK residents and internationally mobile individuals
• Residence, domicile and Long-Term Residence (LTR) reviews to determine whether worldwide assets fall within UK inheritance tax
• Structuring the ownership of UK property and UK investments for international families
• Lifetime gifting strategies and planning around the seven-year rule
• Offshore trust planning and reviewing existing structures for UK inheritance tax efficiency
• Planning for internationally located assets within a UK estate
• Analysis of Estate Treaties to understand benefits and abilities to mitigate
Case Study: Managing IHT Exposure Across Different LTR Positions
A husband and wife, both based in the UAE, had spent significantly different periods of time in the UK, resulting in different Long-Term Residence (LTR) positions and therefore differing exposure to UK Inheritance Tax (IHT).
We worked with the couple to:
- Analyse their respective LTR positions, including when alignment of status was likely to occur
- Model IHT exposure under different scenarios, reflecting both UK-only and worldwide estate outcomes
- Assess the potential use of a spousal election, helping the husband understand when this may be appropriate and the longer-term implications
In parallel, we supported a broader restructuring of their affairs:
- Reviewed asset ownership, including opportunities to move assets outside of the husband’s UK IHT exposure while he remained non-UK resident
- Utilised the UK–UAE Double Tax Treaty, enabling pension withdrawals in a tax-efficient manner and removing funds from the immediate IHT net ahead of April 2027 changes
- Worked alongside Hoxton Legal to ensure appropriate wills and cross-border estate planning documents were in place, covering both UK and overseas assets
The result was a clear understanding of their evolving IHT position, reduced exposure where appropriate, and a coordinated structure aligned to their long-term succession plans.
How Can We Help You?
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