Ever since the Autumn Budget, Inheritance Tax has been hitting the news due to the government’s planned changes to Agricultural and Business Property Relief (1) – with a backlash from the farming and business communities (2).
But don’t forget that there are some other, more long-standing, changes to the Inheritance Tax regime, which are due to come into force on Sunday.
From 6 April 2025, it is now a person’s ‘residence’, rather than ‘domicile’, which dictates which of their assets may be charged to Inheritance Tax.
For those considered UK-resident for Inheritance Tax purposes, their worldwide assets will be included in the charge. Non-UK-residents, on the other hand, are subject to Inheritance Tax on any assets based in the UK.
At the moment, it is the common law concept of domicile which sets out what is brought into the UK Inheritance Tax charge. A person’s domicile, broadly, relates to the country with which they have the closest connection and can depend not only their country of permanent and future residence, but also on the domicile of their parents. There are also certain tax rules, such as those for UK Inheritance Tax, which can impose a deemed domicile even if the person might be connected more closely with another country.
With the change to a residence-based system, Inheritance Tax is now more aligned with other taxes, such as Income Tax and Capital Gains Tax.
An individual will soon be considered a long-term resident for Inheritance Tax purposes when they have been resident in the UK for at least 10 out of the last 20 tax years. This could bring the Inheritance Tax clock forward for non-UK domiciles living in the UK, from 15 years (under the current deemed domicile rules), to 10 years.
What does this mean for you?
As always, it is vital to seek professional advice on your succession planning and now, if these changes may affect you, all the more important to consider your position.
How can Tozers help?
Our inheritance tax and estate planning experts in the Wealth Management team help you plan for the future, with straightforward legal advice to protect yourself and your family. For further information about anything mentioned in this insight, please get in touch with our Tax and Succession team.
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1. Budget 2024: Inheritance tax, family farms and food security - House of Lords Library
2. Farmers withhold wheat in new strike over inheritance tax
