Inheritance Tax reforms for non-doms – UK to switch to residence-based regime from April 2025

Non-domiciled individuals (non-doms) with international asset portfolios will soon be impacted by some major changes to their Inheritance Tax (IHT) obligations.  

As of 6 April 2025, IHT no longer be determined by domicile status.  

Instead, it will move to a new residence-based framework, bringing many long-term UK residents, including those historically protected by non-dom status, into full scope for IHT on their global assets. 

These changes will require both individuals and advisers to reassess structures, trusts and long-standing assumptions around exposure and reliefs. 

End of the domicile regime for IHT 

The change removes the existing rules linking IHT to domicile or deemed domicile status.  

Instead, liability will arise once an individual is a UK resident for 10 out of the previous 20 tax years.  

At this point, their worldwide assets, including those held offshore, become fully exposed to IHT. 

Continuation of Inheritance Tax liability post-departure 

The revised rules introduce an IHT exposure period, referred to as the ‘tail’, that extends beyond the date a person leaves the UK.  

The tail ranges from three to 10 years, with the precise duration determined by the individual’s prior UK residence history: 

• 10 – 13 years of residence – Three-year tail 

• Each additional year – One-year extension 

• Maximum tail – 10 years 

Non-doms who leave the UK before 6 April 2025, and can prove non-UK domicile as of 30 October 2024, will benefit from a fixed three-year exposure, irrespective of previous residence length.  

This transitional provision offers significant planning opportunities. 

Impact on trust structures 

Trust planning is directly affected. From April 2025, a trust’s protection from IHT on non-UK assets will depend on the settlor’s residence status at the time of a chargeable event (e.g. 10-year anniversaries, capital distributions). 

Trusts settled before 30 October 2024 will be excluded from the gift with reservation of benefit rules. 

• Despite this, they will remain within the relevant property regime, facing periodic charges up to six per cent. 

• If a settlor ceases to be a long-term UK resident, exit charges may apply when assets re-qualify as excluded property. 

Business relief restrictions from 2026 

From 6 April 2026, Business Relief (BR) and Agricultural Property Relief (APR) will be capped at £1 million for qualifying overseas assets.  

Only partial relief will apply above this threshold. This change could substantially increase IHT exposure for owners of significant non-UK business or agricultural interests. 

Treaty considerations and next steps 

Estate tax treaties are unaffected, but reliance on treaty relief may now hinge on common law domicile analysis.  

Careful scrutiny of cross-border arrangements will be required. 

Immediate priorities include: 

• Reassessing domicile claims and residence history 

• Reviewing trust structures for alignment with the new regime 

• Considering pre-6 April 2025 asset transfers 

• Evaluating liquidity strategies to meet future liabilities 

• Exploring corporate or family investment vehicles as alternatives 

These reforms will redefine the scope and reach of the UK’s IHT regime.  

Timely professional advice will be essential to mitigate risk and preserve wealth amid these changes. Contact us today for further advice and assistance.