Ten years in Britain and your whole estate changes hands differently

Figures relate to tax year 2025-26 (UK) · 2025 (US)

For decades the question of whether Britain could tax your worldwide estate turned on domicile. Where was your permanent home, where did you intend to die, where were you buried.

It was vague, expensive to argue and frequently resolved in favour of an American who always meant to go back.

From 6 April 2025 that argument is over. Long term residence replaced domicile, and a count of tax years settles it rather than any weighing of intentions.

Key takeaways

• Domicile no longer decides UK inheritance tax exposure.
• The test is ten of the previous twenty tax years as a resident.
• Cross that line and your worldwide estate falls in scope.
• Leaving does not end exposure immediately, and a tail applies.
• Americans face both regimes on the same assets at once.
• The estate tax treaty still speaks the language of domicile.
• Gifts made before the clock runs out are worth planning.

What is long term residence?

A status somebody reaches after living in Britain for at least ten of the previous twenty tax years. It governs whether inheritance tax applies to assets outside Britain. According to GOV.UK guidance on inheritance tax, residence rather than domicile now drives the question.

Residence itself follows the statutory residence test, the same one used for income tax.

So the day counts you already keep for one purpose now decide another.

What changes when you cross the line?

Everything you own anywhere comes into charge rather than just your British assets. Before the tenth year only British property, British bank accounts and similar assets count. Afterwards a brokerage account in Boston and a house in Florida join them.

The rate on the excess above the nil rate bands is 40 per cent.

That is a step change rather than a gradual increase.

A worked example

Take an illustrative example. An American moved to London in August 2015 and has been resident every tax year since.

By 2025-26 she has ten qualifying years behind her. Her British flat was always in scope, but her American retirement accounts and family land in Vermont were not.

From that tenth year the whole lot sits inside the British net. Nothing about her life changed on the day it happened.

Her American estate tax position is unchanged, because citizenship always caught her worldwide estate there.

Before and after the tenth year

How do the nil rate bands work?

A nil rate band of £325,000 applies to every estate, with a further residence band of £175,000 where a home passes to direct descendants. Both figures have stood still for several years. According to GOV.UK guidance on the residence band, it tapers away on larger estates.

Unused bands can transfer to a surviving spouse.

Against a London house and American savings, the bands disappear quickly.

Does leaving Britain end it?

Not at once, and this is the part people most often get wrong. A tail period keeps your worldwide estate in scope after departure, running from three years upwards depending on how long you were resident. Longer residence produces a longer tail.

At the maximum, exposure continues for ten years after you leave.

So the planning question is when the clock started, not when the plane left.

How long is the tail exactly?

It scales with the length of your residence. Somebody who reached the ten year threshold and then left faces a shorter tail than somebody resident for twenty years. The schedule steps up year by year between those extremes.

Checking your own figure matters more than knowing the range.

A year either side of a departure can move it.

What happened to the domicile rules?

They no longer drive inheritance tax, though domicile survives in other contexts and in older documents. Deemed domicile and the fifteen year rule that preceded it have both gone. Trust deeds and wills drafted around domicile need rereading.

Our guide to inheritance tax across both systems covers the combined picture.

Old advice given on the previous rules may now point the wrong way.

Does America tax the same estate?

Yes, because America taxes its citizens on their worldwide estate wherever they live. The exemption is large, standing at $13,990,000 for 2025 and rising to $15 million from 2026. Most estates fall well under it.

So the American charge is often nil while the British one is substantial.

That asymmetry defines the planning for most families we see.

Can you credit one against the other?

The estate tax treaty between the two countries provides relief, but it allocates taxing rights using domicile as the treaty defines it. Britain has changed its domestic test without the treaty following. Working out which country has the primary claim now takes more care than it used to.

Where the American charge is nil, there is nothing to credit anyway.

In our practice that is the usual outcome for ordinary estates.

What about the spouse exemption?

Transfers between spouses escape British inheritance tax where both share the same status. A gift from somebody with long term residence to a spouse without it has historically faced a cap. Checking both positions separately is now the starting point.

Our guide to the marital deduction for a non-citizen spouse covers the American side.

Mixed couples need both answers before drafting anything.

Does it affect trusts you created?

Significantly. Excluded property trusts previously depended on the settlor's domicile when assets went in, which fixed the position permanently. The new approach tests the settlor's status on an ongoing basis, so a trust can move in and out of scope.

Our guide to US settlors of UK trusts covers the American reporting.

Anybody who settled a trust before April 2025 should have it reviewed.

What about your pension?

Pensions have historically sat outside the British estate, which made them an efficient way to pass wealth on. That treatment has been under review, and the direction of travel is towards bringing unused funds into charge.

Check the current position before relying on a pension as an estate planning tool.

Our guide to UK pensions and US retirement reporting covers the lifetime treatment.

Do gifts still work?

They do, and the seven year rule is unchanged. A gift falls out of your estate entirely once you survive seven years from making it. Starting that clock before reaching long term residence is particularly valuable.

Our guide to US gift tax for expats covers the American reporting that follows.

America has no seven year rule, so every substantial gift is reportable there.

Should you give before the tenth year?

Often yes, because assets outside Britain are still beyond reach until the clock runs out. Gifting American assets in year eight removes them before Britain could ever reach them. The American gift reporting still applies.

The window closes quietly and nobody writes to tell you.

Counting your own years accurately is therefore the first task.

How do you count the years?

By tax year rather than by calendar year, using the statutory residence test for each one. Partial years of residence count as full years for this purpose. Split year treatment for income tax does not change the inheritance tax count.

Our guide to the statutory residence test covers how each year is decided.

Go back twenty years, not ten, because the window looks that far.

Does a gap in residence reset it?

A gap helps, because the test looks at ten years within the previous twenty rather than ten consecutive years. Several years abroad in the middle can keep you below the threshold for longer. It does not wipe the slate clean.

Years already banked stay banked unless they fall outside the twenty year window.

So a mid career posting elsewhere buys time rather than a reset.

What if you arrive with a large estate?

The first nine years are the planning window, and they pass faster than people expect. Restructuring foreign assets, settling trusts and making gifts are all considerably easier before the threshold than after it.

Our guide to the FIG regime for arriving Americans covers the income tax side of arrival.

Arriving without advice and seeking it in year eleven is the common pattern.

Does a US will still work?

It may operate, but a single will drafted for one system rarely handles both well. Probate, situs rules and the interaction with British property all need thought. Many families end up with parallel wills covering assets in each country.

Our guide to US executors of UK estates covers administration.

Review any will written before April 2025, since its assumptions have changed.

Does long term residence affect income tax too?

Not directly, because income and gains follow their own regime for new arrivals. The two systems now run on parallel clocks with different lengths, which is a genuine trap. Four years of relief on foreign income sits alongside ten years before the estate test bites.

Confusing the two timetables is the commonest error we correct.

Write both dates down the day you arrive.

What counts as a UK asset anyway?

British land and buildings, British company shares, British bank accounts and anything else sited here. Those stay in charge from your first day, whatever your residence history. Long term residence only adds everything else to the pile.

A London flat is exposed in year one exactly as in year twenty.

So arriving with British property means exposure from the outset.

Does the family home get special treatment?

Only through the residence nil rate band, which requires the home to pass to children or grandchildren. It adds £175,000 for 2025-26 on top of the ordinary band. The band tapers away once an estate passes £2 million.

Americans with substantial estates frequently taper out of it entirely.

Leaving the home to a spouse first preserves the band for later.

What if only one spouse has the status?

The analysis runs separately for each of you, which can produce an odd result in one household. One spouse's worldwide estate may be in charge while the other's is not, purely because they arrived at different times.

Holding foreign assets in the name of the spouse without the status is the obvious response.

It only works where the ownership is genuine and documented.

Does American citizenship change the UK test?

Not at all. Britain counts days and nothing else, so nationality is irrelevant to long term residence. An American, a Canadian and a Briton returning home are all treated identically once the years line up.

That neutrality is what removed the old arguments about intention.

It also removed a defence Americans often relied on.

How much planning time do you really have?

Less than the headline suggests, because effective steps need years to work. A gift takes seven years to leave your estate entirely, so starting in year nine leaves it exposed well past the threshold.

Working backwards, meaningful planning starts around year three.

In our practice almost nobody comes to us that early.

Does a double tax treaty change the sums?

The estate tax treaty can relieve double charging, but it works by deciding which country taxes what rather than by refunding anybody. Where Britain has the primary claim on a worldwide estate and America charges nothing, the treaty has very little to do.

Its machinery matters most for large estates that genuinely face both charges.

For an ordinary estate the British bill simply stands.

What if you own property in a third country?

It joins the worldwide total once the threshold passes, alongside everything else. A flat in Spain or land in Ireland is as exposed as an American brokerage account. That country may tax the same asset on death as well.

Three way exposure needs specialist advice rather than a general rule.

Unilateral relief in Britain can help where no treaty exists.

Can you lose the status once you have it?

Yes, by spending enough years outside Britain for the resident years to drop out of the rolling twenty year window. That takes a long time once you have built up a full count, and the tail runs alongside it.

Somebody resident for twenty years cannot shed it quickly by any route.

Planning before the threshold is far cheaper than unwinding afterwards.

What records should you keep?

Keep a year by year residence record going back twenty years, with the evidence behind each year, plus a schedule of worldwide assets and the date of every substantial gift. Those three things answer the only questions that matter here.

Travel records and tenancy agreements support the residence count.

Executors will need all of it, so keep it somewhere they can find.

How to assess your position

1. List each of the last twenty tax years and your residence status.
2. Count how many of them were resident years.
3. Work out which tax year takes you past the tenth.
4. Schedule your worldwide assets and where each one sits.
5. Apply the nil rate bands to see the exposed amount.
6. Consider gifts of foreign assets before the threshold.
7. Review any trust settled before April 2025.
8. Reread any will drafted under the old domicile rules.

Mistakes and penalties we see with long term residence

The first is assuming an American passport keeps foreign assets out. It never did, and domicile no longer matters.

The second is thinking departure ends exposure. The tail runs for years afterwards.

The third is relying on a trust settled under the old rules without rereading it.

The fourth is counting ten consecutive years. The test looks at ten within twenty, which arrives sooner.

How US UK Tax Accountants helps

We build the twenty year residence table first, because every other answer depends on which year takes you over. Most clients are closer to the threshold than they expect.

Then we schedule worldwide assets against both regimes and show where the real exposure sits. Our trusts and estates service covers the planning that follows.

If you have been in Britain seven or eight years, get in touch while the window is still open.

Last reviewed 18 October 2026. This article is general information and not personal tax advice. These rules changed recently and turn on personal facts, so take advice on your own position.