Does UK Inheritance Tax Apply If You Live Abroad?
Often, yes. Many British expats assume that moving abroad takes them out of UK inheritance tax. For some it eventually does. For many it does not, at least not for years, and some assets stay in the UK tax net whatever happens. Getting this wrong is expensive, because inheritance tax is charged at 40% on the part of an estate above the available allowances.
The rules changed on 6 April 2025. UK inheritance tax used to depend mainly on domicile, a hard-to-pin-down concept linked to where you regard as your permanent home. It now depends mainly on how long you have been resident in the UK. That change helps some expats and catches others out, particularly those who left the UK only recently or who have lived in the UK for most of their adult lives.
This guide explains the rules in plain English: whether the tax reaches your worldwide estate or only your UK assets, how long it follows you after you leave, what your family home and UK property mean for the bill, and what you can do about it. It is general information, not personal tax advice. Inheritance tax also sits within a wider plan, so see our guide to expat savings and investments for how it fits.
The Rules Since 6 April 2025
From 6 April 2025, whether your assets outside the UK are within the scope of UK inheritance tax depends on whether you are a long-term UK resident. Broadly, you are a long-term resident if you have been UK tax resident for at least 10 of the previous 20 tax years. If you are, your worldwide estate can be taxed. If you are not, only your UK assets are in scope.
This is called a residence-based system, and it replaced the old test of domicile. Two things follow.
- If you have lived abroad for a long time, you may no longer be a long-term resident, and your overseas assets may fall outside UK inheritance tax. This can be good news for expats who left years ago.
- If you have recently left the UK, you probably remain a long-term resident for a period after you go. During that period your worldwide estate can still be taxed.
Residence for this purpose is counted in tax years, using the UK’s statutory residence test, which looks at days spent in the UK and your ties to the country. A year in which you were UK resident counts. A year in which you were not does not. Keep records of your days and ties for each year, because you may need to prove your position.
How Long the Tax Follows You: The Tail
Leaving the UK does not end your exposure at once. If you were a long-term resident when you left, your worldwide estate can remain in scope for a set number of years afterwards. This is often called the tail. Its length depends on how long you lived in the UK before you left.
| UK tax years resident in the last 20 | Approximate tail after leaving |
|---|---|
| Fewer than 10 | None. Only UK assets are in scope |
| 10 to 13 | 3 years |
| 14 | 4 years |
| 15 | 5 years |
| 16 | 6 years |
| 17 | 7 years |
| 18 | 8 years |
| 19 | 9 years |
| 20 | 10 years |
Worked example. Priya lived in the UK for 15 of the last 20 tax years before moving to Hong Kong. She is a long-term resident when she leaves. Under the table above she stays in scope for about five years. If she died in year three after leaving, her worldwide estate could be liable to UK inheritance tax. If she died in year six, only her UK assets would be in scope. The figures in this example are illustrative.
If you return to the UK and become resident again, the clock restarts. A short return can reset your position, which matters for expats who move back and forth.
What Is Always in Scope: UK Assets
Whatever your residence history, assets located in the UK stay within UK inheritance tax. The most common examples are UK property, UK bank accounts, UK shares and investments held directly, and the value of a UK business. For many expats, a UK home or buy-to-let is the largest item in the estate.
UK residential property held through an offshore company has been brought into scope as well, so using a company does not remove it from the net. Debts secured on UK property can reduce the value for tax purposes, but the rules limit which debts count, so take advice before assuming a mortgage reduces the bill. If you hold UK investment property, see our guide to UK investment property, and for borrowing against UK property from abroad see expat financing.
Worked example. A non-long-term resident dies with a UK property worth £600,000 and assets abroad worth £400,000. Only the UK property is in scope. With a £325,000 nil-rate band and no other allowances, £275,000 is taxable at 40%, giving a bill of about £110,000. If the home passes to children and the residence nil-rate band of up to £175,000 applies, the taxable amount falls to about £100,000 and the tax to about £40,000. These figures are illustrative.
Rates and Allowances
| Item | Figure | Notes |
|---|---|---|
| Standard rate | 40% | On the part of the estate above allowances |
| Reduced rate | 36% | If at least 10% of the net estate goes to charity |
| Nil-rate band | £325,000 | Can pass to a surviving spouse or civil partner |
| Residence nil-rate band | Up to £175,000 | For a home passed to direct descendants. Reduces for larger estates |
| Spouse exemption | Unlimited | Between UK-domiciled spouses. Lower cap for a non-UK-domiciled spouse |
| Annual gift exemption | £3,000 | Per person, per tax year |
All figures need checking against GOV.UK for the current tax year. Thresholds have been frozen for several years, which pulls more estates into the tax as property values rise.
Where Do You Stand?
| Your position | What is likely in scope | What to do |
|---|---|---|
| Left the UK many years ago and have been abroad well over 10 years | UK assets only | Focus on UK property and UK investments |
| Left recently after living in the UK most of your life | Worldwide estate for the tail period | Plan gifts, trusts and insurance now |
| Plan to return to the UK | Worldwide estate once you are long-term resident again | Plan before you return, not after |
| Own UK property but live abroad | UK property, always | Consider debt, gifts, life cover and the will |
| Hold investments or pensions in several countries | Depends on residence and where assets sit | Review each asset and each country’s rules |
These are general positions. Your own answer depends on your residence history, your assets, your family and where you hold them, so treat the table as a starting point for a conversation, not a conclusion.
Gifts and the Seven-Year Rule
Giving assets away during your lifetime can reduce the size of your estate. Most outright gifts to individuals are free of inheritance tax if you live for seven years after making them. These are called potentially exempt transfers. If you die within seven years, the gift is added back, with a reduction called taper relief if you die between three and seven years afterwards.
Several exemptions apply regardless of the seven-year rule: an annual allowance, small gifts, gifts on marriage and regular gifts out of surplus income. Gifts with strings attached, such as giving away a house you still live in, do not work. The gift is treated as still yours, so you must give up the benefit.
For expats, a gift may also have tax effects in the country where you live or where the recipient lives, so check both before you act. Keep records of what you gave, to whom and when, because your executors will need them.
Trusts and Offshore Structures
A trust lets you set aside assets for beneficiaries while keeping some control. Trusts can take assets out of your estate, protect them from claims and give you flexibility over who benefits and when. They also bring their own tax rules, including charges every ten years on some types and reporting duties.
Under the residence-based system, whether a trust holding non-UK assets is inside UK inheritance tax can depend on the residence of the person who set it up. A trust made while you were non-resident may fall into scope if you later return to the UK and become a long-term resident. Existing trusts that were set up under the old domicile rules should be reviewed, not assumed to be unchanged.
An offshore investment bond can be held in trust or assigned to someone else without being cashed in, which makes it a common planning tool, although the tax rules are complex. Trusts are a specialist area, so take advice from someone who understands both the UK and your country of residence. Our guide to wills and trusts for UK expats explains how they work.
Pensions and the 2027 Change
UK pensions have mostly sat outside the estate for inheritance tax. That is due to change: from 6 April 2027, most unused pension funds and death benefits are scheduled to come within the estate. For people with large pensions, that could add a significant bill on top of any income tax paid by beneficiaries.
If you hold UK pensions from abroad, now is the time to review them. Look at UK pensions for expats, and the options of keeping a pension in the UK, moving it to an expat SIPP or considering a QROPS. Each has different inheritance tax, income tax and reporting consequences, and the right answer depends on where you live and where your beneficiaries are. Our guide to expat pension advice explains how a review works.
Life Insurance to Pay the Bill
Inheritance tax is usually due six months after the end of the month of death, and it often has to be paid before the estate’s assets, such as a UK property, can be sold. That can leave a family forced to sell quickly or borrow. A life insurance policy written in trust can pay out outside the estate and give the family cash when they need it.
The cost depends on your age, health, smoker status and the sum assured. For an expat, check that the insurer will cover someone living in your country and that the policy is placed in a trust that works across borders. See our guides to expat life insurance and expat insurance for the options.
Wills in More Than One Country
A will that works in one country may not work in another. If you own assets in several places, you may need a will for each, or one will drafted to cover them all, checked by a lawyer in every country involved. Without that, assets can end up distributed by local rules you did not choose, and probate can take much longer.
Make sure each will refers to the others, so that signing a new one does not accidentally cancel the old. Review them whenever you move country, marry, divorce, have children or buy property. Your executors should know where your documents are and who to contact in each country. See our guide to wills and trusts for UK expats.
Overseas Assets and Local Inheritance Rules
UK inheritance tax is only one layer. The country where you live, and any country where you own property, may have its own rules. Some countries charge no inheritance or estate tax, and Hong Kong is often cited as one. Others charge tax on the estate or on the beneficiaries, and some impose forced heirship rules that limit who can inherit regardless of your will.
The UK has inheritance tax treaties with only a small number of countries. Where there is no treaty, the same estate can face tax in two places, with relief limited to what each country allows. Find out what applies to every country you hold assets in, and ask for advice from someone who understands both systems.
Savings and Investments in Your Estate
Everything you own forms part of your estate, including savings, investments, bonds and plans. Offshore bonds and regular savings plans can be useful for passing assets on, because they can be assigned or put in trust without being cashed in. See our guides to offshore investment bonds and international regular savings plans. The charges and tax on each still apply, so the estate planning benefit has to justify the cost.
A Step-by-Step Planning Checklist
- Count your UK tax years. Work out how many of the last 20 you were UK resident, and when your tail ends.
- List your assets by country. Property, bank accounts, investments, pensions, businesses and insurance.
- Mark what is in scope. UK assets always, and worldwide assets if you are a long-term resident.
- Estimate the bill. Use the allowances and ask a qualified adviser to check it.
- Review your wills. Make sure each country is covered and the documents fit together.
- Consider gifts and trusts. Decide what you can give away and when.
- Review pensions before 2027. Check where they sit and who benefits.
- Arrange cover for the bill. A life policy in trust can provide cash when it is needed.
- Keep records. Residence days, gifts, trust papers and valuations.
- Review every year or two. Rules, laws and your life all change.
Common Mistakes and Warning Signs
- Assuming you have left the UK tax net. UK assets stay in, and the tail can last up to ten years.
- Relying on an old will. A will from before you moved may not work now.
- Ignoring local rules. The country where you live may override your wishes.
- Giving away a home you still use. A gift with strings attached is ignored for tax.
- Forgetting pensions. The 2027 change could add a large bill.
- Buying a product because of the tax saving alone. Charges and tax elsewhere can outweigh it.
- Not telling your family where things are. Executors need documents and contacts quickly.
Be careful with anyone who promises to remove inheritance tax entirely, pushes you into a product without explaining the costs, or suggests moving a pension to do it. Complicated schemes sold on tax savings alone often fail, and HMRC can challenge them.
If You Plan to Move Back to the UK
Returning to the UK changes your inheritance tax position, often in ways expats do not expect. Once you become UK resident again, the clock starts counting years towards the 10-of-20 test. Anyone who has already built up years of UK residence can become a long-term resident again quickly, which brings the worldwide estate back into scope.
That makes the time before you return the best time to plan. While you are still non-resident, you may be able to make gifts, restructure how assets are held or review trusts without the UK rules biting in the same way. A trust set up while you are non-resident can come into scope if you later return and meet the long-term residence test, so the order of events matters. Pensions and investments held abroad should be reviewed too, because their tax treatment can change on the day you become UK resident.
Timing matters as well. UK residence is decided tax year by tax year, and a few days either side of a deadline can change which year you are resident in. If you are thinking of coming back, work out your residence position for the year of return before you book flights or sell your overseas home. Take advice from someone who understands both your current country and the UK, and speak to them months before the move, not after it.
What Your Executors Will Need to Do
Inheritance tax is paid by your executors, so planning is not only about the numbers. It is also about making their job possible. For an expat with assets in several countries, that job can be long and expensive if the paperwork is not in order.
- Find and value everything. Executors must list the assets and debts and value them at the date of death, in every country.
- Apply for authority to act. UK assets generally need a UK grant of probate. Assets abroad may need a local grant or its equivalent, and the rules differ from country to country.
- Report and pay. The UK estate is reported to HMRC and the tax is normally due six months after the end of the month of death, with interest charged afterwards. Some assets, such as property, can be paid for in instalments.
- Deal with each country. Local tax, local lawyers and local forms may all be needed, and fees add up.
- Distribute the estate. Only after debts and tax are settled can beneficiaries receive what they are due.
You can make this far easier. Keep an up-to-date list of your assets, accounts, advisers and lawyers in each country. Tell your executors where your wills and documents are. Consider a letter of wishes to explain decisions that are not obvious from the will. Where an executor lives in a different country from the assets, think about appointing a professional executor or a local co-executor. A little preparation now can save the family months of delay.
How We Can Help
We work with UK expats from our offices in Hong Kong and Kuala Lumpur. We can look at your residence history, list your assets by country, show what is likely to be in scope and set out your options in plain English, including cover to pay the bill. WhatsApp us