Domicile and Inheritance Tax Explained

What is domicile, and what changed in 2025?

Domicile is a general legal idea of the country you treat as your permanent home, which can differ from where you happen to live or your nationality. For inheritance tax it once decided whether your worldwide estate or only your UK assets were within scope. From 6 April 2025 the domicile and deemed domicile rules were replaced by a long-term UK residence test (gov.uk, as at July 2026, subject to change).

The core inheritance tax figures did not change with this reform. The standard rate stays at 40% on the part of an estate above the nil-rate band of £325,000 per person, and there is normally no tax where everything above that threshold passes to a spouse or civil partner (gov.uk, as at July 2026, subject to change). What changed is the reach of the tax across your assets, not the rate or the main allowance.

The long-term UK resident test

The reform turns on residence, not permanent home. You are generally a long-term UK resident for inheritance tax if you have been UK resident for at least 10 of the previous 20 tax years before a chargeable event, such as death or a lifetime transfer (gov.uk, as at July 2026, subject to change). Once that test is met, your non-UK assets can come within inheritance tax as well as your UK ones.

Residence for each tax year is worked out under the statutory residence test, the same framework used for income tax and capital gains tax (gov.uk, as at July 2026, subject to change). Because the test looks back over 20 years, someone can move to the UK and stay outside long-term resident status for a period before crossing the line.

UK assets, overseas assets and inheritance tax

Where your assets sit still matters, alongside your residence history. UK-situated assets, such as a house or bank account in this country, have always been within the scope of inheritance tax whatever the owner's residence or domicile. What the long-term resident test changes is whether your overseas assets are caught as well (gov.uk, HMRC manual, as at July 2026, subject to change).

Situation	UK assets	Non-UK assets
Long-term UK resident	Within IHT	Generally within IHT
Not a long-term UK resident	Within IHT	Generally outside IHT

Situation

UK assets

Non-UK assets

Long-term UK resident

Within IHT

Generally within IHT

Not a long-term UK resident

Within IHT

Generally outside IHT

General position based on gov.uk, long-term UK resident guidance and the HMRC inheritance tax manual, as at July 2026 and subject to change. Individual cases can differ, and treaties may alter the outcome.

So a non-resident who owns only a UK property is still exposed to inheritance tax on that property, while a long-term UK resident with a holiday home abroad may find that overseas property counts too. The nil-rate band of £325,000 and the 40% rate apply to the estate that is within scope (gov.uk, as at July 2026, subject to change). For how the bands stack up, see our guide to IHT thresholds.

Where domicile still matters

Domicile has not vanished from the picture entirely. It can still be relevant for deaths and lifetime transfers made before 6 April 2025, for certain settled property under transitional rules, and where a double taxation treaty between the UK and another country still refers to the common law idea of domicile (gov.uk, HMRC manual, as at July 2026, subject to change). Domicile also continues to matter for other areas of law outside inheritance tax.

A worked example (illustration only). Priya moved to the UK 12 years ago and has been UK resident in each of those tax years. She owns a UK flat worth £400,000 and an apartment overseas worth £250,000. Because she has been resident for at least 10 of the previous 20 tax years, she is generally a long-term UK resident, so both properties can fall within inheritance tax (gov.uk, as at July 2026, subject to change). Her estate could still draw on the £325,000 nil-rate band, with 40% applying only above the available bands (gov.uk, as at July 2026, subject to change). Change the years or the figures and the answer changes, so this is general information rather than a calculation for any real estate.

Cross-border estates can also raise questions of relief for foreign tax paid and how a treaty allocates taxing rights. These points turn on the detail of each case, so many people with assets or connections in more than one country choose to take advice from a qualified professional who can consider the full position before anything is put in place.

Domicile and inheritance tax across the UK

Inheritance tax is a UK-wide tax, so the long-term resident test, the £325,000 nil-rate band and the 40% rate apply the same way in Scotland, England, Wales and Northern Ireland (gov.uk, as at July 2026, subject to change). The surrounding succession law differs. Scotland has its own rules, including legal rights that can give a spouse and children a fixed share, and it uses confirmation rather than a grant of probate. Where an estate touches more than one UK nation or another country, it can be worth taking advice in each. For the wider picture, see our estate planning guide.

Frequently asked questions

Is inheritance tax still based on domicile?

Not for most events from 6 April 2025. The domicile and deemed domicile rules were replaced by a long-term UK residence test, so whether worldwide assets are within inheritance tax now generally turns on residence history rather than domicile (gov.uk, as at July 2026, subject to change). Domicile can still matter for earlier events and some treaties.

Who counts as a long-term UK resident?

You are generally a long-term UK resident for inheritance tax if you were UK resident for at least 10 of the previous 20 tax years before a chargeable event such as death (gov.uk, as at July 2026, subject to change). Residence for each year is judged under the statutory residence test. The precise position can be detailed, so many people confirm it with a qualified adviser.

Are my overseas assets subject to UK inheritance tax?

They can be if you are a long-term UK resident, in which case non-UK assets may fall within inheritance tax alongside your UK ones (gov.uk, as at July 2026, subject to change). If you are not a long-term resident, overseas assets are generally outside scope, though UK assets remain within it. Treaties may change the outcome in individual cases.

Does moving abroad remove me from UK inheritance tax straight away?

Not immediately. Long-term resident status can continue for a tail period after you leave, from a minimum of 3 tax years up to a maximum of 10, depending on how long you were resident (gov.uk, as at July 2026, subject to change). UK-situated assets stay within inheritance tax regardless. Timing and records matter, so advice can help.

Do UK assets get taxed if I have never lived in the UK?

Generally yes for the UK assets themselves. UK-situated property, such as a house or bank account here, has always been within the scope of inheritance tax whatever the owner's residence or domicile (gov.uk, HMRC manual, as at July 2026, subject to change). Non-UK assets of a non-resident are usually outside scope. A double taxation treaty can affect the result.

Does domicile still matter for anything?

Yes, in limited ways. Domicile can remain relevant for deaths and transfers before 6 April 2025, for certain settled property under transitional rules, and where a double taxation treaty still refers to it (gov.uk, HMRC manual, as at July 2026, subject to change). It also applies in other areas of law. Cross-border cases can be complex, so professional advice is often taken.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.