Domicile, as an IHT connecting factor for UK property investors, ended on 5 April 2025. For nearly two centuries the question "is this estate within UK IHT scope?" turned on a common-law concept of permanent home that was famously unpredictable in cases of long-term immigration or repatriation. From 6 April 2025 the question turns on tax residence, measured by the same Statutory Residence Test that already governs income tax and CGT. The headline switch is that an individual is a "long-term UK resident" (LTR) if UK tax resident in either the previous 10 consecutive tax years or any 10 of the previous 20 tax years; LTR status pulls worldwide assets into UK IHT; non-LTR status confines IHT to UK situs property. The reform was announced in the Autumn Budget 2024 and implemented by Finance Act 2025.

For non-resident landlords, the practical question is whether the change makes their UK property more or less expensive at death, and whether the historic planning routes (offshore-company envelopes, excluded-property trusts) still work. The answers are mostly continuity. UK situs residential property has been within UK IHT regardless of domicile since the introduction of Schedule A1 IHTA 1984 on 6 April 2017; that look-through is unchanged. Excluded-property trusts settled by non-doms before 6 April 2025 retain their protected status under transitional rules, subject to three conditions on situs and timing. The 30 October 2024 Budget date is the cut-off for both individual deemed-domicile protections (a 3-year exit ramp) and for trust transitional protection. The November 2025 Budget added an anti-avoidance package that extends the Schedule A1 look-through to UK agricultural land and adds exit-charge protections where a settlor ceases to be LTR.

This page sets out the LTR test as HMRC publishes it, the tapered tail period on departure, the transitional protections, the Schedule A1 look-through, the Budget 2025 anti-avoidance additions, and worked examples for two of the most-common non-resident landlord profiles. For the IHT pillar (the descriptive companion that covers reliefs and the headline charge), see Inheritance Tax on Rental Property Portfolios: UK Guide 2026. For the operational expat companion (income-tax-side compliance and NRL scheme), the pillar is UK Property Income for Expats.

What changed on 6 April 2025: domicile out, residence in

The pre-reform position had been built up over decades of case law and statute. An individual was within UK IHT on worldwide assets if UK-domiciled (the common-law domicile of origin, choice, or dependency) or deemed UK-domiciled under IHTA 1984 s.267 (the 15-of-20 tax-residence rule, plus a 3-year shadow on departure). A non-domiciled non-resident was within UK IHT only on UK situs assets. The system worked but was difficult to apply at the margins: domicile of origin is sticky, intentions are hard to evidence, and the deemed-domicile shadows on departure created edge cases.

The post-reform position substitutes a single, mechanical residence-based test. Domicile is no longer relevant to IHT scope. Tax residence under the Statutory Residence Test (FA 2013 Sch 45) drives the analysis. The LTR test asks whether the individual has clocked enough UK tax residence (10 consecutive years, or 10 within the most recent 20) to be drawn into worldwide-asset IHT. The test is objective and mechanical: it can be calculated from a residence history without needing to investigate intention or family ties.

For UK property investors the regime change is mostly a relabelling of who is in worldwide-asset scope. The non-domiciled non-resident becomes the non-LTR; the deemed-domiciled long-resident becomes the LTR; the offshore-trust planning structures sit in transitional protection or fall outside it on the same broad logic. What changes is the mechanical clarity, the calibrated tail period replacing the old 3-year shadow, and the explicit Budget 2024 message that the UK is rebuilding its inheritance-tax connecting factor for an era of more-mobile international clients.

The long-term-resident test: 10 consecutive or 10 of 20

An individual is a long-term UK resident in a given tax year if either of these two conditions is met:

  • UK tax resident for the previous 10 consecutive tax years, OR
  • UK tax resident for at least 10 of the previous 20 tax years.

Both routes are sufficient on their own. The 10-consecutive-years route catches individuals who have lived continuously in the UK for at least a decade. The 10-of-20-years route catches individuals with a more-broken residence record (e.g. periods abroad for work, returns to the UK) who have clocked 10 years of UK residence at some point in the most-recent 20 tax years. Both routes use UK tax residence as determined by the Statutory Residence Test in FA 2013 Sch 45; this is the same test used for income tax and CGT, so a residence position taken for income-tax purposes carries through to IHT.

The LTR test does not depend on UK ties beyond tax residence. Family in the UK, a property in the UK, UK citizenship, a UK passport, a UK bank account, none of these by themselves make an individual LTR. Conversely, an individual with no UK property or family who happens to have spent 10 of the previous 20 tax years working in the UK is LTR for IHT and within worldwide-asset scope on death.

One important practical point. The reform does not change the Statutory Residence Test itself. The interaction between SRT day-count tests and the LTR threshold is mechanical: each tax year you are UK-resident under SRT counts as one year toward the LTR test. Years of non-UK residence under SRT do not count. The day-count thresholds in SRT (16, 46, 91, 121, 183 days, depending on prior-year residence and UK ties) determine each individual tax year. For the day-count mechanics, see the companion Expat Tax Obligations page.

The tail period: up to 10 years of continuing IHT exposure after you leave

On leaving the UK, LTR status does not end immediately. The post-reform tail period continues LTR status for a number of years that taper with the length of prior UK residence. HMRC's published guidance sets out the schedule:

  • 10 to 13 years of UK residence: 3 years of tail
  • 14 years of UK residence: 4 years
  • 15 years: 5 years
  • 16 years: 6 years
  • 17 years: 7 years
  • 18 years: 8 years
  • 19 years: 9 years
  • 20 or more years: 10 years (the maximum)

The schedule is intuitive: every year of residence beyond the 10-of-20 threshold adds one year of tail, capped at 10. An individual who has lived in the UK for 10 years and then leaves carries the LTR (and therefore worldwide-asset IHT) tail for 3 years. An individual who has lived in the UK for 20+ years carries the maximum 10-year tail.

The tail matters because it determines when a non-resident's worldwide assets fall out of UK IHT scope. UK situs assets remain in scope regardless of residence; the tail only affects the non-UK part of the estate. A landlord who leaves the UK after 22 years, owning a UK BTL portfolio plus assets in their new country, continues to face UK IHT on both portfolios for 10 years after departure. From year 11 onwards, only the UK portfolio remains in scope.

The tail also matters for lifetime gifts. A transfer of non-UK assets within the tail period by an individual who is still LTR is within UK IHT (subject to the 7-year clock and exemptions). Outside the tail, the non-UK transfer is outside UK IHT entirely.

Transitional protections for non-doms and deemed-doms at 30 October 2024

The reform anchored two transitional protections to the 30 October 2024 Budget date. Both are escape ramps for individuals whose pre-reform planning relied on domicile concepts.

The non-dom protection. An individual who, on 30 October 2024, did not have UK domicile and did not have deemed UK domicile status, and who is non-UK resident throughout the 2025-26 tax year, and who does not return to the UK, is treated as never having entered the LTR regime. This catches the population of non-doms who departed the UK before the reform date and want certainty that they are outside the new regime.

The deemed-dom protection. An individual who, on 30 October 2024, had deemed UK domicile (under the pre-reform 15-of-20 rule or the domicile-of-origin rule), and who is non-UK resident throughout the 2025-26 tax year, and who does not return to the UK, stops being LTR after 3 years of non-residence, rather than the standard tapered tail. This caters for individuals who had structured around the pre-reform 3-year deemed-domicile shadow on departure and want to keep the same tail length they planned for.

Both protections collapse on return to the UK during the 2025-26 tax year. The reform legislation does not allow a non-resident-in-2025-26 plus return-in-2026-27 to preserve transitional protection. Returning to the UK in any year during the protection window re-engages the standard LTR test on a 10-of-20 footing.

UK situs property: always in scope, in every regime

UK situs property has been within UK IHT regardless of the owner's residence or domicile under every IHT regime since the introduction of the modern Inheritance Tax in 1986. The April 2025 reform did not change this. A non-LTR who owns UK situs property pays UK IHT on that property at death.

"UK situs" for IHT purposes covers UK land and buildings (residential and commercial), UK bank accounts (in sterling), shares in UK-resident companies, UK-issued securities, and certain other UK-connected assets. There are long-standing UK-situs exemptions that continue post-reform: UK government securities (gilts) held by non-residents, foreign currency bank accounts at a UK bank held by non-residents, and certain other instruments. These exemptions remain because they are calibrated to encourage non-resident investment in UK debt without IHT friction.

The nil-rate band of £325,000 and the residence nil-rate band of £175,000 (with the £2m taper) apply to non-residents in the same way they apply to UK residents. RNRB requires direct lineal descendants and the property to have been a residence of the deceased at some point. Non-LTR investors can claim NRB and RNRB without restriction.

Schedule A1 IHTA 1984: the look-through for overseas-company structures

The pre-2017 planning route for non-domiciled non-residents owning UK residential property was to hold the property through a non-UK company, often itself held by a non-UK trust. Under the pre-2017 domicile rules, shares in a non-UK company were non-UK situs property; for a non-domiciled non-resident shareholder, the company structure removed UK IHT exposure on the underlying UK property at the cost of running an offshore structure (annual costs, ATED compliance from 2013, registration of overseas entities since 2022).

Schedule A1 IHTA 1984, inserted by Finance (No. 2) Act 2017 and in force from 6 April 2017, closed the route. It treats the non-UK company shares as if they were UK residential property for IHT purposes, to the extent their value is attributable to UK residential property. The look-through applies regardless of the shareholder's domicile or residence and regardless of how many layers of structure (company over company, company under trust) separate the individual from the UK property.

The April 2025 residence-based reform did not change Schedule A1. The look-through has been in place for nine years and remains operative under the LTR regime in the same form. Competitor pages that suggest the April 2025 reform makes Schedule A1 less restrictive, or that offshore companies are now back as an IHT-planning tool for UK residential property, are wrong.

From the Budget 2025 anti-avoidance package, the Schedule A1 look-through is being extended to UK agricultural land and buildings held via non-UK companies or similar bodies. The extension closes the equivalent planning route for non-resident owners of UK farmland.

Excluded property trusts: settlor LTR status at the relevant moment is what counts

The excluded-property trust route has been the backbone of long-term planning for international families. Pre-reform, a non-UK-domiciled settlor could settle non-UK situs assets into a trust; provided the assets remained non-UK situs and the settlor remained non-UK domiciled (or deemed-domiciled), the trust assets were excluded property for IHT and outside UK IHT charge regardless of subsequent events.

The April 2025 reform replaced the settlor-domicile gate with a settlor-LTR-status gate. The trust transitional rules preserve excluded-property status for assets that meet three conditions at the relevant moment:

  1. The assets were settled into the trust while the settlor was non-UK domiciled (under the pre-reform rules).
  2. The assets were overseas (non-UK situs) on 30 October 2024 (Budget date).
  3. The assets remain overseas (non-UK situs) at the relevant chargeable event (death of settlor, ten-year anniversary, or exit).

Where all three conditions hold, the assets remain excluded property under the post-reform regime. Pre-existing trusts can therefore preserve their excluded-property status indefinitely if managed carefully. Adding assets to a pre-2025 trust after the Budget date is treated under the new rules: those new assets are not protected unless the settlor is non-LTR at the time of addition. UK situs property within a pre-2025 trust was already not excluded property (Schedule A1 and the relevant property regime applied pre-reform); the reform does not change that.

The Budget 2025 anti-avoidance package added a further protection: where a settlor ceases to be LTR (departure plus expiry of the tail), there is an IHT charge if there is a later change of situs of trust assets (e.g. an offshore asset is converted into a UK situs asset). This prevents non-LTR-settlor trusts from being used to bring non-UK assets into a UK-connected position without IHT consequence.

Worked example one: Aisha, an Italian resident with a £1.2m London BTL portfolio

Aisha is an Italian national resident in Milan. She inherited an interest in three London BTL flats from her father (UK-domiciled, died 2018) and has owned the portfolio outright since 2020. Combined value at the date of her notional death is £1.2 million, all UK situs residential property. Aisha has never been UK tax resident under SRT; she visits family in London for 2 to 3 weeks a year, well below the 16-day "automatic non-resident" threshold for someone with no UK ties.

Aisha is non-LTR (zero years of UK tax residence in the previous 20). UK IHT scope is confined to UK situs property: the £1.2m portfolio is fully in scope, but her Italian assets (her primary residence, Italian bank accounts, Italian pension and investments) are outside UK IHT entirely. The April 2025 reform changed nothing for Aisha in substance, but it provides cleaner certainty: under the old domicile regime she might have had to evidence non-UK-domicile-of-origin and not-deemed-domicile; under the LTR regime the SRT day-count test in her favour is mechanical.

UK IHT calculation on her death: portfolio £1,200,000, less NRB £325,000, less RNRB £175,000 (residential property; can pass to her son, a direct lineal descendant), chargeable value £700,000 at 40% = £280,000 of IHT. The Italian end of her estate is taxed under Italian succession rules; the UK-Italy DTA on succession (a 1968 convention) gives credit for the UK tax against any Italian IHT-equivalent charge on the same UK property.

If Aisha had instead held the portfolio through a Jersey company (a pre-2017 planning structure), Schedule A1 would have looked through the company to the UK residential property, producing the same £280,000 charge plus the running costs of the offshore structure (annual ATED, ROE registration, accountancy). The pre-2017 envelope approach no longer reduces UK IHT, and the April 2025 reform did not bring it back.

Worked example two: David, returning to the UK after 8 years in Dubai

David is a UK national who left the UK on 1 April 2018 to take a senior finance role in Dubai. He had previously been UK tax resident for 22 consecutive tax years. He acquired UK deemed-domicile under the pre-reform 15-of-20 rule, and his planning had relied on the 3-year domicile shadow on departure. He has been non-UK resident under SRT since 2018-19. He retained a £1.6m UK BTL portfolio and acquired a £2.0m portfolio of UAE and Singapore investments while non-resident. He is considering returning to the UK in 2026-27 (after 8 tax years of non-residence).

Pre-reform analysis: David's deemed-domicile shadow ran from 6 April 2018 to 5 April 2021 (3 years). He was outside worldwide-asset UK IHT from 2021-22 onwards under the old rules.

Post-reform analysis: David is in the deemed-dom transitional protection if he meets three conditions. He had deemed-domicile on 30 October 2024 (yes, technically, although the deemed-dom concept was being phased out); he was non-UK resident throughout 2025-26 (yes); and he does not return to the UK (he is planning to return in 2026-27). The third condition is breached by his planned return: the deemed-dom transitional 3-year exit ramp collapses on return, and David is re-engaged with the standard LTR test from the year of return.

On return, David's residence history is 22 prior UK tax years (1996-97 to 2017-18), then 8 non-UK years (2018-19 to 2025-26). The 10-of-20 LTR test in his year of return (2026-27) looks at the previous 20 tax years (2006-07 to 2025-26); of those, 12 were UK-resident (2006-07 to 2017-18). He is LTR from his year of return. His worldwide assets (UK £1.6m plus UAE/Singapore £2.0m, total £3.6m) come back into UK IHT scope.

The decision matters for the £2.0m of non-UK assets. If David delays return by another 2 tax years (to 2028-29), the 10-of-20 window covers 2008-09 to 2027-28; only 10 of those are UK-resident; he is still LTR. To take the non-UK assets fully out of the LTR scope, David would need to remain non-resident for 10 consecutive tax years (so the 10-of-20 window does not contain enough UK-resident years to retrigger). That points to a non-resident period running to at least 2027-28 (10 years) for a clean reset on return.

The post-reform regime has effectively extended David's relevant planning horizon from the old 3-year shadow to a 10-year clean-break threshold for full worldwide-asset detachment. Planning advice in his position would either accept the LTR exposure on return (and use lifetime gifting and life cover for the non-UK piece) or defer return until the SRT clock has fully reset.

Budget 2025 anti-avoidance: agricultural land look-through and trust exit charges

The 26 November 2025 anti-avoidance package added three further provisions to the April 2025 regime:

  • Schedule A1 extended to UK agricultural land. The look-through that treats non-UK-company-held UK residential property as UK situs for IHT is being extended to UK agricultural land and buildings. Offshore-company structures over UK farmland no longer remove the underlying UK IHT exposure.
  • Trust exit charge on situs change after settlor ceases to be LTR. Where a settlor ceases to be LTR (departure plus tail expiry), and there is a later change of situs of trust assets (e.g. an offshore asset is converted into a UK situs asset), an IHT charge arises. This closes the planning route of detaching settlor LTR status and then bringing non-UK trust assets back into UK situs without an IHT cost.
  • Charity exemption tightened. IHT charity exemption is being restricted to gifts made directly to UK charities and registered clubs; gifts to trusts that are not registered as UK charities or clubs lose the exemption. This affects international philanthropic structures that flowed funds through unregistered offshore trusts to UK charities; the planning route now needs to use a UK-registered charity vehicle.

The full anti-avoidance text was published on 26 November 2025 (gov.uk publication "Inheritance tax: anti-avoidance"). The provisions form part of the wider Budget 2025 package and have been drafted on the standard "draft Finance Act publication" timetable.

What this means for the most-common non-resident landlord profiles

Mapping the regime to the typical non-resident UK property investor:

Never-UK-resident overseas investor with UK BTL only. Pre-reform position: UK IHT on the UK property at 40% above the standard allowances, no worldwide-asset exposure, offshore-company structuring blocked since 2017 (Schedule A1). Post-reform position: same. The regime change is neutral.

Long-historic-UK resident who has now left. Pre-reform position: 3-year deemed-domicile shadow, then outside worldwide-asset UK IHT. Post-reform position: tapered tail of 3 to 10 years depending on length of prior residence. Worse than the old position for individuals with very long prior UK residence (the tail is now 10 years not 3); broadly equivalent for individuals with 10 to 13 years of prior residence (the tail is 3 years either way).

Returning expat after extended absence. Pre-reform position: deemed-domicile re-engaged after 15 of 20 tax years UK-resident again. Post-reform position: LTR re-engaged after either 10 consecutive tax years again, or 10 of 20 years again. The 10-of-20 route effectively pulls returning expats back into worldwide-asset scope faster than the old rules did.

International family using excluded-property trusts. Pre-reform position: settle non-UK assets into a non-dom trust, protected indefinitely. Post-reform position: pre-30-October-2024 settlements protected under transitional rules subject to situs and timing tests; post-Budget settlements use the new LTR-of-settlor rule. The reform has tightened the test but preserved the route for pre-existing structures.

For the planning context (which IHT mitigations work for which landlord segment, how the LTR regime interacts with the April 2026 BPR/APR cap and the April 2027 pension reform), see the IHT Decision Framework. For the cap reform specifically, see The April 2026 BPR/APR £1m Cap. For the NRCGT side of any death-time disposal, see Non-Resident CGT on UK Property. For the operational NRL scheme that governs income-tax-side compliance for non-resident landlords, see Non-Resident Landlord Scheme: Complete Guide. For the FIC + Schedule A1 myth (does an offshore company still help?), see FIC IHT Treatment and the BPR Myth.

What this page does not cover, and where to read further

This page is the IHT-side regime-change page for non-resident UK property investors. It does not cover: the Statutory Residence Test day-count rules in detail (covered in the expat-obligations pillar), the operational NRL scheme for income-tax withholding (covered in the NRL guide), NRCGT mechanics for death-time or lifetime disposals (covered in the NRCGT page), or the income-tax-side comparison between holding UK property as a non-resident individual versus through a UK or offshore company. For the wider planning framework that integrates this regime change with the April 2026 BPR/APR cap and the April 2027 pension reform, the decision-led companion is IHT Decision Framework for UK Landlords. For the descriptive IHT pillar that covers reliefs and the headline charge, see Inheritance Tax on Rental Property Portfolios: UK Guide 2026.

External authority cited above: HMRC guidance: Inheritance Tax if you're a long-term UK resident (6 April 2025); Reforming the taxation of non-UK domiciled individuals (Autumn Budget 2024, 30 October 2024); Changes to the taxation of non-UK domiciled individuals: Policy Summary (July 2024); Inheritance Tax: anti-avoidance measures for non-long-term UK residents and trusts (Budget 2025, 26 November 2025); Inheritance Tax Act 1984 (legislation.gov.uk) (Schedule A1 inserted by Finance (No. 2) Act 2017); HMRC IHTM04000: How Inheritance Tax is charged.