Inheritance Tax
Why IHT Is Still Relevant – Even When You Live Abroad
Why IHT Is Still Relevant – Even When You Live Abroad
Many British expatriates assume that moving overseas automatically removes them from the UK tax net. For Inheritance Tax (IHT), that is not necessarily the case.
Since 6 April 2025, the UK has operated a residence-based system for determining whether non-UK assets fall within the scope of IHT. While UK-situated assets remain within the scope of UK IHT regardless of where you live, overseas assets can also become taxable if you are treated as a long-term UK resident under the new rules.
For internationally mobile individuals and families, this can create complex and sometimes unexpected exposure. Years spent living in the UK can continue to have consequences even after you leave. Conversely, those who have genuinely established long-term lives abroad may be able to limit their exposure on non-UK assets.
With structured planning and early advice, it is possible to reduce risk, preserve family wealth, and ensure assets pass efficiently to the next generation.
At Hoxton Wealth, we help expatriates understand their position under the current rules and design estate strategies that work across jurisdictions.
Understanding UK IHT Thresholds and Exemptions
We’re delighted to offer Move to France visitors a complimentary consultation to address your financial concerns. Whether you’re exploring how to access your personal pension, transfer it to France, or simply need help with financial planning, our expert advisors are here to help.
Residence and “Long-Term Resident” Status
Under the current regime, the treatment of non-UK assets for IHT depends largely on whether an individual is classified as a long-term UK resident (LTR).
Broadly speaking, an individual can be treated as long-term resident if they have been UK resident for a specified number of tax years within a defined look-back period. The detailed tests are set out in legislation and depend on residence history under the Statutory Residence Test.
If an individual is considered long-term resident at the time of death or chargeable transfer:
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Their worldwide assets may fall within the scope of UK IHT.
If they are not long-term resident:
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Only UK-situated assets are generally within scope.
Importantly, ceasing UK residence does not automatically remove exposure on overseas assets. There can be a tail period during which non-UK assets remain within scope, depending on how long the individual was UK resident previously.
This shift from a domicile-based framework to a residence-based system means that historic years of UK residence are now central to IHT planning for expats.
How UK and Overseas Assets Are Treated
Under the current regime, the treatment of non-UK assets for IHT depends largely on whether an individual is classified as a long-term UK resident (LTR).
Broadly speaking, an individual can be treated as long-term resident if they have been UK resident for a specified number of tax years within a defined look-back period. The detailed tests are set out in legislation and depend on residence history under the Statutory Residence Test.
If an individual is considered long-term resident at the time of death or chargeable transfer:
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Their worldwide assets may fall within the scope of UK IHT.
If they are not long-term resident:
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Only UK-situated assets are generally within scope.
Importantly, ceasing UK residence does not automatically remove exposure on overseas assets. There can be a tail period during which non-UK assets remain within scope, depending on how long the individual was UK resident previously.
This shift from a domicile-based framework to a residence-based system means that historic years of UK residence are now central to IHT planning for expats.
Planning Strategies for Reducing IHT Exposure
Effective IHT planning requires a coordinated approach that reflects residence history, asset location, and family objectives.
Common strategies include:
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Lifetime Gifting
Structured gifting programmes can reduce the taxable estate over time, provided the donor survives the relevant period and the gifts are made correctly.
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Trust Planning
Appropriate trust arrangements can help manage succession and control, although they are subject to specific IHT charging provisions and ongoing compliance obligations.
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Life Insurance for IHT Liquidity
A life insurance policy written in trust can provide funds to meet an IHT liability, helping to avoid forced asset sales on death.
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Reviewing Residence Position
Understanding your long-term residence status and any continuing exposure after leaving the UK is central to managing non-UK asset risk.
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Ownership Structuring
How assets are held, individually, jointly, or via corporate or trust structures, can materially affect tax outcomes and should be reviewed regularly.
Planning is most effective when undertaken well in advance rather than in reaction to ill health or legislative change.
Case Study: A British Expat in the UAE
James, a 58-year-old British national, has lived in Dubai for over 15 years. He owns a UK property worth £1.2 million and holds investment accounts both in the UK and overseas. His adult children live in the UK.
Although James is no longer UK resident, his prior years of UK residence mean he needs to assess whether he is treated as long-term resident under the post-6 April 2025 rules. If so, his worldwide estate could remain within the scope of UK IHT. If not, his exposure may be limited to UK-situated assets.
Following a structured review:
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His residence history was analysed to determine long-term residence status.
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His UK property ownership was reviewed to understand succession and liquidity implications.
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A life policy was established in trust to provide potential IHT funding.
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A coordinated estate plan was created to reflect both UK and UAE considerations.
By clarifying his status and restructuring appropriately, James gained a clearer understanding of his exposure and a practical strategy for managing it.
Book a Consultation
Whether you have recently relocated or have been overseas for many years, it is important to understand how the UK’s residence-based IHT regime may apply to you.
Hoxton Wealth works with internationally mobile families to design estate and succession strategies that reflect current legislation, cross-border realities, and long-term family objectives.
Book a consultation to review your residence history, asset structure, and potential exposure under today’s rules.
UK IHT can apply to UK-situated assets regardless of residence. Non-UK assets may also fall within scope if you are treated as long-term UK resident under current rules.
Relocating does not automatically remove exposure. Previous UK residence can continue to affect the treatment of non-UK assets for a period after departure.
UK property is generally within the scope of UK IHT, regardless of where you reside.
Trusts can play a role in succession planning and control of assets, but they are subject to specific IHT charging rules and must be structured carefully.
Our Services
Our Services
We understand the complexities of managing finances in a foreign country. At Hoxton Wealth, we offer tailored financial solutions to ensure you feel secure, no matter where you are in the world. Our services include:
- Expat Financial Planning – Customised planning to help you navigate the financial intricacies of living abroad.
- Investment Management – Diversified strategies to optimize your investments across international markets.
- Tax Optimisation – Expert advice to minimise tax liabilities and ensure compliance with local and international tax laws.
- Retirement Solutions – Planning for a comfortable retirement, wherever you choose to call home.
- 401k / IRA Rollovers – Assistance in managing and transferring your US retirement accounts.
- UK Pension Transfers – Expert guidance on transferring UK pensions to optimize your retirement savings internationally.
