UK Inheritance Tax has changed..
Goodbye “domicile”, hello “residence”..
…and what this means for UK expats in the UAE.
If there’s one sentence I hear all the time from UK expats, it’s this:
“I’m in Dubai now, so inheritance tax won’t be a thing for me anymore, right?”
I wish it were that simple.
Because with UK inheritance tax (IHT), where you live and how long you’ve been gone matters, but it’s not an instant switch-off the minute you land at DXB.
And from April 2025, the rules changed in a big way.
Let’s break it down, like normal humans.
A 60-second refresher: what is IHT?
IHT is a tax on an estate (property, money, investments etc) when someone dies.
Most people know the headline bits:
The standard nil-rate band is £325,000 (and yes, it’s been stuck there for years).
Above that, IHT is often charged at 40% (there are reliefs and exemptions, but 40% is the one that stings).
There’s also an extra allowance in some cases where a main home is left to children or grandchildren.
So yes… it can get expensive quickly.
How it worked before: “domicile” ran the show
Historically, whether the UK could charge IHT on your worldwide assets depended on domicile (and “deemed domicile”).
In plain English, domicile is basically “where is your permanent home, really?”
And yes, it’s as messy as it sounds.
Under the old world, if you were UK domiciled (or treated as it), the UK could bring your worldwide estate into the IHT net.
What changed: it’s now about long-term residence (not domicile)
Now the UK looks at whether you’re a long-term UK resident.
If you are, your non-UK assets may still be within scope of UK IHT.
So what makes you “long-term UK resident”?
Broadly, it’s based on whether you’ve been UK tax resident for enough years across a 20-year lookback period.
This is why two people living in the UAE right now can have totally different IHT exposure, depending on their history.
The part people get wrong: leaving the UK doesn’t instantly remove you from IHT on overseas assets
This is the bit I want you to hear clearly:
Becoming non-UK resident doesn’t mean your overseas assets automatically fall outside UK IHT overnight.
There can be a “tail”.
Meaning you may still be caught for a period after leaving, depending on how long you were resident in the UK before you went.
So if you’re thinking about moving, timing matters. A lot.
What this means for UAE expats (the good news bit)
For many long-term UAE expats, the shift to a residence-based system can be positive.
If you’ve been outside the UK long enough (and don’t meet the long-term UK residence test), you’re generally looking at UK IHT exposure on UK assets only, not everything you own worldwide.
That’s a big deal for people with:
UAE property or investments
international portfolios
family wealth held outside the UK
A simple example
Let’s say you:
lived in the UK for years
moved to the UAE
became non-UK resident
built up assets overseas
If you’re still within the “tail” period, your non-UK assets could still be in scope.
But if you’ve been outside the UK long enough and you don’t meet the long-term residence test, you’re more likely to be looking at IHT only on UK assets.
Same destination (Dubai). Very different outcome.
What if you’re planning to leave the UK?
Please don’t rely on this plan:
“I’ll leave the UK and my estate will instantly be outside IHT.”
Because that’s how families end up with nasty surprises later.
Instead, do this:
1) Map your residency history
It’s boring, but it’s the foundation. You need to know where you sit under the long-term residence test.
2) Separate your UK assets from your overseas assets
UK property is the common one that keeps people in the IHT conversation, even when they live abroad.
3) If you have assets in multiple countries, plan like a grown-up
Different countries can have different inheritance rules (and sometimes forced heirship), so your will and ownership structure needs to match real life, not wishful thinking.
4) Get proper advice before making big moves
Especially if you’re considering trusts, family investment companies, or holding structures. These can be brilliant when done properly and an absolute nightmare when guessed at.
Final thought
IHT is already emotional because it’s tied to family and legacy.
The last thing you want is for your loved ones to inherit confusion, delays, and a tax bill that feels like a punch in the stomach.
If you’re UK-based with overseas assets, or UK-to-UAE and building wealth across borders, this is the moment to review your position properly, while you still have options.
