Inheritance Tax (IHT) has seen some big changes this year — and if you live in the UK or have assets here, it’s worth understanding how these updates could affect your family and your future plans.
Whether you're a long-term resident, a business owner, or someone with overseas assets, here’s a simple breakdown of what’s changed and what you can do about it.
What’s Changed Since April 2025?
It’s Now Based on Residency, Not Domicile
If you’ve lived in the UK for 10 out of the last 20 years, you’re now classed as a Long-Term Resident (LTR). That means your worldwide assets — not just UK ones — could be subject to IHT.
Leaving the UK Doesn’t Immediately End Your Tax Exposure
Even if you move abroad, you may still be liable for UK IHT for up to 10 years after leaving — known as the “tail rule”.
Trusts May No Longer Protect Overseas Assets
Trusts set up to shield foreign assets (Excluded Property Trusts) may now be taxable if you’re an LTR. Existing trusts might still offer protection, but it’s worth reviewing them.
Business & Farming Reliefs Are Changing
From April 2026:
- Business Property Relief (BPR) will be capped at £1 million, with a 20% IHT charge on anything above.
- Agricultural Property Relief (APR) will include land under environmental schemes — but with stricter rules.
Pensions Could Be Taxed from 2027
From April 2027, unused pension funds and death-in-service benefits may be included in your estate for IHT. Life insurance policies written in trust are expected to remain outside the IHT net.
What You Can Do
- Check your residency status : especially if you’re close to the 10-year mark.
- Review any trusts : particularly those holding overseas assets.
- Plan ahead if you’re leaving the UK : timing matters under the new rules.
- Reassess business and farming assets : make sure they still qualify for relief.
- Use your allowances : the Nil-Rate Band (£325,000) and Residence Nil-Rate Band (£175,000) are still available.
- Speak to a financial adviser : the rules are more complex than ever, and tailored advice can help you avoid unnecessary tax.
FAQs
1 . What is a Long-Term UK Resident and why does it matter for IHT?
If you’ve lived in the UK for 10 out of the last 20 years, your worldwide assets may now be subject to UK IHT.
2. Do I need to review my trusts?
Yes — trusts that previously protected overseas assets may now be taxable if you’re an LTR.
3. Will my pension be taxed when I die?
From April 2027, unused pension funds and death-in-service benefits may be included in your estate for IHT.
4. Are business and farming assets still protected?
Partially — but new caps and rules mean it’s worth reviewing your position.
5. Can I still use gifting to reduce IHT?
Yes — gifting remains a key strategy, especially if done early and with proper planning.
This article is for information only. It is not financial advice or a personal recommendation, and it does not take account of your circumstances. Any recommendation would follow a full assessment.
Tax treatment depends on individual circumstances and may change in future. The Financial Conduct Authority does not regulate will writing or some forms of estate planning and tax advice.