The UK is a popular destination for expats due to its culture, career opportunities, and lifestyle – but inheritance tax (IHT) is rarely top of the moving checklist.
A very common mistake expats from European countries, the Middle East, and across the world make is assuming that, because their estate is outside the UK, it’s exempt from IHT.
Unfortunately, that’s not how it works. In fact, under the 2026 rules, your worldwide estate can become subject to UK inheritance tax faster than ever before.
Now, instead of asking whether you’re UK‑domiciled, the rules focus on whether you’re a long‑term UK resident. Once you meet the “long‑term UK resident” test, your overseas assets can be brought into the UK IHT net, so your worldwide estate can be chargeable sooner than under the old domicile rules.
We understand how confusing IHT is, particularly when you’re dealing with more than one country’s tax rules. To help out, we’ve created this guide that covers what UK expats need to know about IHT and their obligations. Read on to learn about which assets are affected, how status changes the rules, available reliefs to cut high costs, and mistakes to avoid.
How Does IHT Work for UK Expats
IHT is charged on the value of your estate when you die. An estate usually includes things like:
- Property
- Savings
- Investments
- Business interests
- Personal belongings
If IHT is due, it’s paid to HM Revenue and Customs (HMRC), which is the UK’s tax authority.
It’s important to know that IHT is paid by the estate of the person who has died – not by the people receiving the money or property. In other words, the tax is taken out before anything is passed on to family or other beneficiaries.
The standard IHT tax rate in the UK is 40%, but it only applies to the part of the estate above the UK inheritance tax threshold (known as the nil-rate band). This rate is currently £325,000 for most people.
Anything above that tax-free threshold may be taxed at 40%, unless certain reliefs or exemptions apply.
How to Know If You Have to Pay IHT as a British Expat
Under the rules that took effect on 6 April 2025, the UK completely changed how it decides who pays IHT.
Previously, your tax bill depended on a legal concept called domicile (where you considered your permanent home to be). That has been replaced by a strictly mathematical residence-based system.
Simply put: whether you’ll be charged UK inheritance tax now comes down to two main things: where your assets are and how long you’ve been a UK tax resident.
1. UK Assets are Always in the UK IHT Net
No matter how long you’ve lived in the UK, or what your long-term plans are, certain assets are always subject to UK inheritance tax. These include:
- A home or property in the UK
- Money held in UK bank accounts
- UK-based shares, funds, or other investments
So even if you’ve just arrived, these assets could be taxed when you die.
2. Your Overseas Assets Depend on How Long You’ve Lived in the UK
This is where the 10-year rule comes in.
If you’ve been a UK tax resident for 10 out of the last 20 tax years, you may be treated as a long-term resident for inheritance tax purposes.
Once this happens, the UK can start to look at your worldwide estate – not solely what you own in the UK. This catches many people out, as they assume that if their main home, family, or money is back home, the UK can’t tax it.
This doesn’t mean everything is automatically taxed at 40%. You’ll still have access to allowances, exemptions, and reliefs (like the £325,000 nil-rate band, spousal exemptions, and others). But it does mean that a much larger portion of your wealth may now be considered when calculating your IHT bill.
When you will not have long-term UK residence
Under the new rules, you are generally treated as a long‑term UK resident if you have been UK tax resident for at least 10 of the last 20 tax years.
You will usually stop being treated as a long‑term UK resident once you have been non‑UK resident for a long enough continuous period – broadly, at least 10 consecutive tax years.
Once you have been non‑resident for that long stretch, your non‑UK assets should fall back outside the UK inheritance tax net (although your UK assets remain within scope).
The detailed transitional and anti‑avoidance rules can be complex, so it’s sensible to get personalised advice if you are moving in or out of the UK.
Cross-Border Estate Planning for Expats to Reduce IHT
For many expats, the first 10 years in the UK are a key window for planning. During this period, your overseas assets may still sit outside the UK IHT net – so what you do early on directly impacts how much IHT you pay on your estate.
Here are a few of the main ways people plan ahead.
1. Planning Before Year 10
If you have property, savings, or investments abroad, the most effective planning often happens before you become a long-term UK resident.
Some people choose to gift foreign assets to family members while they’re still outside the UK IHT net. Others look at trust structures that can help keep future growth outside their personal estate.
These options are more limited than they used to be, but they can still be useful to British expats in the right circumstances.
2. Using Surplus Income
The surplus income rule (officially called normal expenditure out of income) lets you give away money regularly without it being subject to Inheritance Tax – as long as the gifts come from your normal income and not your savings or assets.
To qualify:
- The gifts must be made from regular income (like salary, pension, or rental income)
- You must still be able to cover your usual living costs
- The payments need to be regular and ongoing, not one-off lump sums
There’s no limit to how much you can give under this rule, as long as those conditions are met.
Common examples include:
- Paying rent or living costs for a child
- Regularly contributing to a child’s savings account
- Supporting an elderly relative
3. Life Insurance as a Backstop
If you know you’re likely to stay in the UK long term, and your estate will eventually be taxable, life insurance can act as a safety net.
When set up properly (usually written in trust), the payout can be used to cover the IHT bill – without becoming part of your estate itself. It doesn’t reduce the tax, but it can stop your family from needing to sell assets to pay it.
4. Planning With Your Spouses
If one partner is UK-based and the other isn’t – or if you’ve spent different lengths of time in the UK – there may be ways to structure things so assets can pass between you more efficiently.
From April 2025, where one spouse or civil partner is treated as a long‑term UK resident and the other is not, the usual spouse exemption can be capped, unless the non‑long‑term‑resident spouse elects into the UK system for IHT for a period of years.
This can be complex, but in the right situations, it’s worth the effort. If in doubt, an expat tax specialist will be able to guide you through your options.
A Quick Note on Pensions
For a long time, pensions were one of the easiest ways to keep money outside the IHT system. That’s changing. From 2027, many unused pension pots could be brought into scope for IHT.
If you’ve been relying on pensions as part of your estate planning, it’s worth revisiting that strategy now.
Expat Tax Services to Make Sense of Your UK inheritance Tax Position
Expat Taxes UK works with both new arrivals and long-term UK residents to help them understand how UK inheritance tax and UK income tax apply to their situation. This allows you to make informed decisions about your money, now and in the future.
We look at your full financial picture. That means helping you plan for income tax, foreign income, residency status, and long-term inheritance tax exposure – so more of your wealth goes to your loved ones, and not the tax office.
If you’d like personalised advice on your IHT exposure, UK income tax obligations, or long-term planning, book a consultation with our UK expat tax specialists today.
By booking a consultation, you’ll receive a £100 credit that can be applied to any future services – including UK tax return preparation – so you can start saving straight away!
DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expattaxes.co.uk Limited (hereafter ‘the parties’) accept no liability for any action taken based on the information in this article or any of the articles on this website.
