UK Long-Term Non-Residency
- Maplebrook Services
- Jan 8
- 3 min read
The UK abolished the domicile-based tax system for “non-doms “on 6 April 2025, replacing it with a residence-based system.
An individual will be deemed long-term non-UK resident (LTNR) if they have not been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year in which the chargeable event (including death) arises.
Accordingly, in such circumstances a LTNR may only be liable to Inheritance Tax (IHT) on UK-situs assets (including bank accounts) that they own at date of their death.
Who is fully IHT-exempt on transfers between spouses?
If both spouses are UK long-term residents (LTRs) under the post-2025 rules, transfers between them are fully exempt from UK inheritance tax (IHT).
If neither spouse is LTR (both are non-UK resident for IHT purposes), spouse exemption still applies to UK-situs assets.
What happens if only one spouse is LTR? (mixed-residence couple)
Where one spouse is LTR (for example, wife in the UK) and the other is not LTR (husband abroad), the unlimited spouse exemption does not apply.
Instead, transfers from the LTR spouse to the non-LTR spouse are only exempt up to the nil-rate band, currently £325,000, over the couple’s lifetime (lifetime gifts plus transfers on death combined).
Amounts above £325,000 may be subject to IHT or treated as potentially exempt transfers (PETs), which fall out of charge only if the donor survives seven years.
Election for the non-LTR spouse to be treated as LTR
The non-LTR spouse can elect to be treated as a UK LTR for IHT purposes, so that transfers to them qualify for the full, unlimited spouse exemption.
The trade-off is that their worldwide assets then come within the scope of UK IHT, and the election generally lasts until they have been non-UK resident for 10 consecutive tax years.
Whether to elect depends on: (a) how likely they are to remain non-UK resident for a long period and (b) the desire to move value now without IHT, weighed against exposing their wider estate to UK IHT.
Do joint accounts solve the mixed LTR problem?
Having a joint account does not change either spouse’s residence status and does not turn a non-LTR spouse into an LTR, so it does not create an unlimited spouse exemption.
IHT looks at who really owns the money (beneficial ownership) and whether each spouse is LTR or not.
Therefore, where one spouse is LTR and the other is not, the spouse exemption on transfers remains capped at £325,000 in total, regardless of joint account structuring.
When does a joint account matter for IHT?
Scenario A – both fund proportionally: If each spouse puts in their own money and withdraws their own share, there is no transfer between them and no IHT gift.
Scenario B – one funds, the other spends: If the LTR spouse funds the joint account and the non-LTR spouse withdraws or uses the funds, HMRC normally treats the withdrawals as gifts from the LTR spouse to the non-LTR spouse, counting towards the £325,000 lifetime limit; amounts above that will be PETs or immediately chargeable.
Scenario C – death with a joint account: On death, HMRC looks at who contributed; if the LTR spouse provided 100% of the funds, then 100% of the balance is in their estate, and where the surviving spouse is non-LTR, the spouse exemption is restricted to £325,000.
What do joint accounts help with?
Joint accounts mainly help with administration: access to funds, paying bills and sometimes simplifying probate.
They do not bypass the £325,000 cap and do not convert a non-LTR spouse into an LTR for IHT.
The information provided in this article is for general informational purposes only and does not constitute financial, or other professional advice. While we strive to provide accurate and up-to-date information, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, or suitability of the information contained herein. Any reliance you place on such information is strictly at your own risk. In no event will we be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising out of, or in connection with, the use of this article.
Contact Maplebrook Services Ltd today to assist you in creating an effective Will, protect your estate and ensure your assets go to the people you choose.
At Maplebrook Services, we help clients by:
Drafting legally robust Wills that clearly state your wishes.
Offering secure Will storage.
Offering probate support to ensure your estate is administered safely and efficiently.
All advisors at Maplebrook Services are fully qualified Willwriters, registered with the Institute of Professional Willwriters, who undergo regular Continuing Professional Development through numerous webinars, weekly updates and notifications of forthcoming/new legislation. Maplebrook Services Limited has €2.4 Million of Professional Indemnity Insurance.
Call us: +357 26 600780
Email: info@maplebrookservices.com
