UK Inheritance Tax for Internationally Mobile Families: What Long-Term Residence Means
By Georgia Holmes
Understand how the UK’s long-term residence rules affect Inheritance Tax on overseas assets, including the residence test, leaving and returning to the UK, transitional provisions and planning considerations for internationally mobile families.
For internationally mobile families, wealth planning rarely stops at national borders. Property may be owned in several countries, investment portfolios may be held overseas, and family members may move between jurisdictions throughout their lives.
These arrangements can raise important questions about UK Inheritance Tax (IHT), particularly when someone moves to the UK, leaves after many years or returns following an extended period abroad.
Since 6 April 2025, the UK has used a long-term residence test to determine whether an individual's overseas assets fall within the scope of IHT under the new regime. This replaced the previous domicile-based framework for relevant transfers and deaths from that date, although domicile remains relevant in certain circumstances.
The change is particularly important for internationally mobile entrepreneurs, returning expatriates, non-UK nationals with substantial UK connections and families with overseas investments, property or trusts.
Understanding the rules requires more than knowing where someone lives today. Their UK tax-residence history, the timing of a move, how assets are owned and any applicable transitional provisions can all influence the outcome.
What are the UK long-term residence rules for Inheritance Tax?
Under the rules introduced by the Finance Act 2025, an individual will generally be a long-term UK resident for IHT purposes if they were UK tax resident for at least 10 of the 20 tax years immediately preceding the relevant tax year.
The test focuses on tax residence rather than nationality or where someone considers their permanent home to be. A British citizen living abroad is not automatically a long-term UK resident. Equally, a person with another nationality who has lived in the UK for many years may meet the test.
The test is applied to the tax year in which the relevant event occurs, such as a person's death or a lifetime transfer of assets. The individual's residence history must therefore be considered in the context of that particular tax year.
For example, someone who has been UK tax resident for 12 of the relevant 20 tax years may meet the long-term residence test. If they own a holiday home in France and an overseas investment portfolio, those assets may fall within the scope of UK IHT, subject to the detailed rules and any applicable exemptions.
By contrast, someone who has recently moved to the UK will not generally have their personally owned overseas assets brought within UK IHT solely because they live here. UK-situated assets may still be chargeable, and separate rules can apply to trusts and particular asset types.
How is UK residence calculated?
For IHT purposes, UK residence is generally determined using the rules applicable to Income Tax and Capital Gains Tax.
The Statutory Residence Test applies from the 2013–14 tax year onwards. Earlier years are assessed under the residence rules that applied at the time. If an individual qualifies for split-year treatment, the year generally counts as a full year of UK residence for IHT purposes.
This means that counting the number of calendar years someone has lived in Britain may not provide…