The end of non-dom status: what the 2025 reform means for expats abroad

On 6 April 2025 the UK scrapped its centuries-old domicile-based tax system and replaced it with one based on residence. Most of the coverage focused on wealthy non-doms living in the UK, but the change matters just as much for British expats who have already left. The headline for you: leaving the UK no longer cleanly cuts your tie to UK inheritance tax, and how long you lived in the UK now decides how long that tie lasts. If you moved abroad after a long stretch in the UK, your worldwide estate can stay within UK inheritance tax for years.

Here's what actually changed and what it means if you're living overseas.

What the old system was

For decades, UK tax hinged on domicile, a slippery legal idea meaning the country you treat as your permanent home, distinct from where you live or your nationality. Non-domiciled UK residents, the famous "non-doms", could use the remittance basis, paying UK tax on foreign income and gains only if they brought the money into the UK. For inheritance tax, domicile was the key: if you were UK-domiciled, your worldwide estate was taxable; if not, only your UK assets were. Live in the UK long enough, 15 of the previous 20 years, and you became "deemed domiciled" and taxed on everything.

That whole structure has gone.

What changed on 6 April 2025

Domicile no longer determines your UK tax. The remittance basis is abolished, deemed domicile is gone, and tax now follows residence.

For income and capital gains, new arrivals get a four-year window of full relief on foreign income and gains (the FIG regime), provided they hadn't been UK tax resident in the prior 10 years. After that, foreign income and gains are taxed as they arise, like UK ones. There's a transitional rebasing of foreign assets held on 5 April 2017 to limit historic gains, and a temporary facility to bring older offshore funds into the UK at reduced rates of 12 to 15 per cent during 2025 to 2028.

For inheritance tax, the change that matters most to expats, domicile is replaced by long-term residence. You're a long-term UK resident if you've been UK tax resident for at least 10 of the last 20 tax years, and if you are, your worldwide estate falls within UK inheritance tax.

The part expats miss: the tail

This is the point people get wrong. Becoming a long-term UK resident doesn't switch off the moment you leave. You keep that status, and the worldwide inheritance tax exposure that comes with it, for a tail period after departure.

The tail scales with how long you lived in the UK. Ten to 13 years of residence gives a three-year tail. Each further year adds one, up to a maximum of 10 years for someone who was resident for 20. So if you spent 15 years in the UK and moved abroad in 2026, your worldwide estate stays within UK inheritance tax for about five years after you leave. Only once the tail runs out do your non-UK assets fall outside the net, and if you move back, the 10-of-20 clock can start again.

The blunt version: moving abroad, even for years, does not by itself end your UK inheritance tax on worldwide assets. Many expats assume departure was a clean break. Under the new rules, it often isn't, at least not straight away.

What's always caught, regardless

One thing didn't change. Anything physically in the UK, UK property above all, plus UK bank accounts and most UK shares, stays within UK inheritance tax no matter where you live or how long you've been gone. If you're not a long-term UK resident, broadly because you were UK resident for fewer than 10 of the last 20 tax years or your tail has run out, only your UK assets are taxed, which is broadly where non-doms used to sit. But "based abroad" never meant your UK house escaped.

The numbers, and a change coming in 2027

The familiar allowances are unchanged and now frozen for the long term. The nil-rate band stays at £325,000, the residence nil-rate band at £175,000 where a home passes to direct descendants, both frozen to April 2031. The rate above the threshold remains 40 per cent, dropping to 36 per cent where at least 10 per cent of the estate goes to charity. Spouse exemptions and transferable allowances continue.

One more change is on the way. From 6 April 2027, most unused pension funds will be brought into your estate for inheritance tax. Pensions have long sat outside the taxable estate, so this is a meaningful shift for anyone relying on a UK pension to pass wealth on, and it interacts with everything above.

What this means if you're abroad

The practical takeaway is that almost every British expat with more than a brief UK history should reassess their position, and the first question is simply: how many of the last 20 tax years were you UK resident?

If it's fewer than 10, your worldwide assets are outside UK inheritance tax and only your UK assets are caught, much as before. If it's 10 or more, your worldwide estate is in scope, and you need to know how long your tail runs. Someone who left recently after a long UK career is in a very different position from someone who has been settled overseas for two decades.

This is where it touches your will. The reform changes the backdrop against which you should be planning, not the mechanics of a will itself, but it's a good prompt to check that your UK assets are properly covered by a UK will, that you're making use of the spouse exemption and the nil-rate bands, and that your UK arrangements are coordinated with anything you hold in your country of residence. If you've leaned on a UK pension as a tax-efficient way to pass money on, the 2027 change is worth factoring in now.

A few quick examples

Someone who spent 20 years in the UK and emigrated in 2026 carries the maximum 10-year tail. Their worldwide estate stays within UK inheritance tax for a decade after leaving.

Someone who left after 12 years has a three-year tail, after which only their UK assets remain in scope.

Someone who has lived abroad for 15 years and was UK resident for only a handful of the last 20 is already outside the worldwide net. Their UK flat, though, is still taxable as a UK-situated asset, as it always was.

Where this leaves you

The end of non-dom status was sold as a change for the wealthy in Britain, but its real reach extends to British expats everywhere. The system is simpler in principle, residence not domicile, but the tail means leaving the UK no longer ends your inheritance tax exposure on a fixed date. Work out your residence position, keep your UK assets covered by a UK will, and revisit the plan before the 2027 pension change lands.

A clear, valid UK will is the natural foundation for that. Expat Legacy prepares UK wills for British expats, in plain English, designed to sit alongside whatever you hold abroad.

Sources

• Reforming the taxation of non-UK domiciled individuals (gov.uk)
• HMRC Residence, Domicile and Remittance Basis Manual RDRM73400, TRF charge (gov.uk)
• HMRC Inheritance Tax Manual IHTM13024, deemed domicile (gov.uk)
• HMRC Inheritance Tax Manual IHTM47020, long-term UK residence test (gov.uk)
• Inheritance Tax (gov.uk)
• Budget 2025 overview of tax legislation and rates (gov.uk)
• Inheritance Tax: unused pension funds and death benefits (gov.uk)

This article is general information, not legal or tax advice. The transitional rules are detailed and your position depends on your own residence history and assets, so it's worth getting advice tailored to you before you act.