As the seasons change, I know I cannot be alone when I am dreaming of moving to far-flung countries with longer days, warmer weather, and some winter sun. This is already a reality for some of our clients, and an appetising thought for others. Whilst we dream of starting a new life with cocktails on the beach, the not-so-fun thoughts are about how UK tax can follow you long after you’ve boarded the plane.
UK Inheritance Tax (IHT) is confusing and often misunderstood, especially for those who do not live in the UK but have property and investments here. There are also other considerations, such as Income Tax and Capital Gains Tax, which this post will not cover.
💼 UK Inheritance Tax: What If You Live Abroad?
If you own assets in the UK but live overseas, you might still be affected by UK Inheritance Tax (IHT) — and understanding how is essential for proper estate planning.
Here’s a breakdown of what you need to know, especially around the concept of being a “Long-Term Resident” and how that impacts your exposure to UK IHT.
✅ Do I Have to Pay Inheritance Tax in the UK?
Yes — if you have UK-based assets (like property, shares, or bank accounts), your estate could be liable for IHT. The tax is generally 40% on the value of assets transferred on death, but lifetime transfers may also be taxed in certain situations.
Whether your entire global estate is taxed or just your UK-based assets depends on your residency status.
🏠 What Is a Long-Term Resident?
Being a Long-Term UK Resident means you’ve been:
- UK tax resident for 10 consecutive years, or
- UK tax resident for at least 10 years in the past 20
Even after leaving the UK, you may retain Long-Term Resident status for several years, depending on how long you previously lived in the UK.
💷 What’s Taxed (and What Isn’t)?
- If you’re not a Long-Term Resident, only UK assets are subject to IHT.
- If you are a Long-Term Resident, global assets are included.
- Some reliefs may apply for business and agricultural property — but these are assessed individually.
🎁 Lifetime Gifts & Transfers
Certain gifts or asset transfers during your lifetime can also trigger IHT:
- CLTs (Chargeable Lifetime Transfers): E.g., transfers to trusts, taxed at 20% upfront.
- PETs (Potentially Exempt Transfers): E.g., gifts to individuals — no tax now, but
fullup to 40% if you die within 7 years.
📉 IHT Allowances & Reliefs
Every estate gets:
- £325,000 Nil Rate Band (frozen until April 2028)
- £175,000 Residence Nil Rate Band (for property that you have lived in which is left to your children and grandchildren, so long as your Estate is worth less than £2,000,000)
With careful planning — especially for married couples — up to £1 million (and sometimes more) can be sheltered from IHT.
However, special rules apply if your spouse is not a Long-Term Resident.
🌍 Cross-Border Tax Risks
If you hold assets in multiple countries, you may face double taxation unless a treaty (like the UK-US one) applies.
It’s also vital to check whether local inheritance laws might override your Will — some countries enforce mandatory heirship rules that could disrupt your estate plan.
⚠️ Common Pitfalls for Expats
- Assuming IHT doesn’t apply even if you live abroad — it might.
- Failing to plan before becoming a Long-Term Resident as you can consider Estate Planning on your global assets before moving to the UK
- Not reviewing Wills in light of international assets or outdated documents
- Missing relief opportunities on business or agricultural assets
📌 The Bottom Line
UK Inheritance Tax can impact anyone with UK assets — regardless of where they live. If you’re acquiring UK property, returning to the UK, or already have assets or ties here, it’s essential to understand your IHT exposure and residency status.
Planning ahead is key. At Nockolds, we help international clients build tax-efficient estate plans tailored to their circumstances.
Got questions? At Nockolds, we work with clients across the UK and internationally to navigate Inheritance Tax and cross border estate planning. If you have questions about your exposure to UK IHT or need tailored legal advice, please contact our private client team on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch..