IHTM47023 - Long-term UK residence test: Charges on 6 April 2025

The long-term UK residence test comes into听force on 6 April 2025听and the status of foreign trust assets will depend upon the long-term UK residence status of the settlor听(IHTM47000).听For settlors听who were UK domiciled (IHTM13000) at the time assets became comprised听in the settlement, up until 6 April 2025,听those assets would not have been excluded property.听 If the settlor听is not a long-term UK resident听(IHTM47020)听under the new rules which come into force on 6 April 2025, this may result in an immediate Inheritance Tax (IHT) charge.听听

Example 1听

Katerina is UK domiciled but became non-UK resident in 2011-12.听听听听

As she is UK domiciled under common law at听30 October 2024, the transitional provisions听(IHMT47021)听do not apply to her.听听听听

However, in 2025-26听Katarina is not a long-term听UK听resident because she has not been resident for听10 out of the last 20 tax years under the test and so is not in scope for UK IHT听on her foreign听personally held听assets.听

If Katerina has foreign assets which she settled into a trust, these would be relevant property up until 6 April 2025 and would become excluded听property听on that date听because Katerina is not a long-term UK resident听under the test.听Therefore,听a proportionate charge听(IHTM42110) arises on 6 April 2025. Following that proportionate charge, as Katerina is not a long-term UK resident, any foreign assets she settled into trust would be out of scope for IHT from 6 April 2025, unless she becomes a long-term UK resident in the future.

Example听2听

Ping听has a domicile of origin in the UK, and moved abroad for 30 years, acquiring听a domicile of choice elsewhere.听听听After living away from the UK for 30 years, she became UK听resident in 2018-19.听听听

She听was听a formerly domiciled resident (IHTM13062)听from 2019-20 onwards听because after returning to the UK, she is treated as UK domiciled听for IHT purposes after one听year of UK residence.听Ping had settled a trust on 1 January听2007 with foreign assets, and听these were relevant property from 2019-20 to 2024-25听because of Ping鈥檚 status as a formerly domiciled resident.听听听

On 6 April 2025, Ping is not a long-term UK resident as she has only been resident in the UK for 7 out of the last 20 tax years.听 The foreign settled assets become excluded property on 6 April 2025 and the proportionate charge (IHTM42110) arises.听 The听rate (IHTM42115) will reflect:听听

  • that the assets were not relevant property until 2019-20, when they听became relevant property, requiring a recalculation of the rate at the last ten-year anniversary (1 January 2017)听

  • that the proportionate charge arises on 6 April 2025 and so there have been 33 quarters since the last ten-year anniversary on 1 January 2017.