UK Inheritance Tax and the 2024 Budget: What's Changed & How Can I Protect My Assets?

On November 30th 2024, the newly elected Labour Party made monumental changes to how a person's UK Inheritance tax and 'Domicile' status would now be calculated.

Historically, UK domicile was a common law concept, and when determining whether an inheritance tax (IHT) was due on a person's death, it was purely based on whether they were deemed to be "British" at the time of death. Those particularly affected by the old landscape of rules were expats living in countries that could not get the indefinite right to remain there or prove that they had, in fact, adopted an indefinite residence in the country where they lived. The fact that a person could not claim to be a citizen or a definite resident of a country meant that in the event of their death, all of their assets, not just in the UK, would be liable to UK Heritage tax upon their death.

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For those reading this who don't know the rates, the UK inheritance tax is a tax rate upon death chargeable against a person's estate on values greater than £325,000 at a rate of 40%. There are exceptions for married people and assets deemed to be your main residence at the time of death. The exceptions are enhanced allowances but not a complete removal of the tax.

From April 2025, the concept of 'domicile' will no longer be relevant for inheritance tax purposes. The entire regime will now be based on a new system called "Long-Term Resident."

This new concept of long-term residents is based on individuals who have been residents for at least 10 out of the previous 20 tax years. This new change is a huge revelation for expats who have now been out of the UK for 10 years but were previously deemed docile because they couldn't claim long-term or indefinite residency in the country where they live, for example, the United Arab Emirates.

It's nearly impossible for a UK expat to be given a UAE passport or indefinite right to remain here until death; therefore, they would always historically have been deemed domicile upon their death, in which case all of their assets globally are subject to IHT payable to HMRC.

In addition to this change, there are also proposed discussions that UK-registered pensions will be liable for UK Inheritance tax from 2027, regardless of where the member lives or whether they are British.

In addition, excluded property trusts are now within the scope of IHT for those who are deemed long-term residents of the UK. This will include offshore holding companies that hold UK assets such as investments and real estate.

As you can imagine, for any long-term resident or even new resident overseas, this is quite a complex landscape to navigate, and the importance of getting qualified and regulated advice has never been more prudent than now. An estimated 5.5 million British people live overseas, but this new legislation may affect them or their loved ones at some point in the future.

Please complete the short form below if you would like to receive a free, no-obligation call to discuss how these changes may affect you now or in the future. We will then arrange for one of our international partner advisers to contact you and discuss how they could help.

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