UK Inheritance Taxes: When Expensive Actions Aren’t Needed

Good inheritance tax planning starts with a surprisingly simple question: what is actually exposed to UK Inheritance Tax? If that question is answered incorrectly, an elaborate trust or offshore structure can become an expensive solution to a problem that did not exist.

Since 6 April 2025, the UK has operated a residence-based framework for determining when non-UK assets fall within IHT. Broadly, a person who has been UK resident for at least 10 of the previous 20 tax years can be treated as a long-term UK resident, with a continuing ‘tail’ after departure in some circumstances. This replaced the old reliance on domicile for most individuals.

For someone who is no longer within that long-term residence test, UK-situs assets can remain relevant to IHT, but non-UK cash, investments and property may be outside the UK estate. That means moving already non-UK assets into a costly offshore trust purely to ‘save UK IHT’ may add fees, reporting duties, complexity and loss of control without producing the promised tax benefit.

The position also changes from 6 April 2027. Most unused pension funds and pension death benefits will be brought into the IHT calculation for deaths on or after that date. The reform does not, however, make every foreign asset of a long-term expatriate automatically taxable in the UK. Residence history and asset location still matter.

Before accepting any planning proposal, ask for a written explanation of the tax exposure being solved, the legal basis for the structure, the total establishment and annual costs, the regulatory status of the adviser and product, and the tax treatment in the country where you live.

Sophisticated planning has a place. But complexity should be the consequence of a genuine need, not the sales proposition itself.