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

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

Example 1

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

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

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

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 property on that date because Katerina is not a long-term UK resident under the test. Therefore, a proportionate charge (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 2

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

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

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. The foreign settled assets become excluded property on 6 April 2025 and the proportionate charge (IHTM42110) arises. The rate (IHTM42115) will reflect:

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

• 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.