Inheritance Tax (IHT) has long been one of the trickier areas of tax planning, especially for individuals with foreign connections or significant assets. With major reform that came into force this year, it’s more important than ever to stay on top of changes. At Dunkley’s Accountants, we provide up-to-date tax advice in Bristol to help you structure your estate, claim reliefs, and minimise the IHT burden.
What Changed This Year
- The IHT regime has shifted from a domicile-based approach to a residence-based one. From now, whether your non-UK assets are taxed for IHT will depend on whether you qualify as a long-term UK resident (usually having been UK resident for at least 10 of the previous 20 tax years).
- The traditional concept of “deemed domicile” has been abolished for IHT purposes.
- Trust protections and the status of non-UK assets in trusts have been reworked. If you are a settlor or beneficiary of a trust, the residence of the settlor or your own long-term resident status may now impact how assets are taxed.
These are sweeping changes. Planning that was viable under the old domicile regime may no longer be effective, so reviewing and adjusting your estate plan is essential.
How Inheritance Tax Works Under the New Regime
- The nil-rate band remains at £325,000 for individuals, and the residence nil-rate band (for passing a main home to direct descendants) still up to £175,000 (subject to conditions).
- If you are a long-term resident, your worldwide assets (not just UK ones) may be included in your IHT estate.
- There will be a “tail” period after someone leaves the UK where their non-UK assets remain within IHT scope, depending on how many years of residence you had.
Reliefs and Reductions You Can Still Use
Even with reforms, tax relief opportunities remain. Some of the most useful are:
- Annual gift allowances – gifts up to £3,000 per year free of IHT.
- Charitable donations – leaving at least 10% of your estate to charity may reduce the IHT rate to 36%.
- Business Relief & Agricultural Relief – for qualifying business or farming assets, relief may be granted, though the rules around thresholds and tapering are more restrictive under upcoming reforms.
- Use of trusts – though trust rules are changing, trusts can still be used to control timing and beneficiaries of distributions, potentially reducing the IHT impact if structured carefully.
How Dunkley’s Can Help
Because the rules are in flux, working with experts is critical. At Dunkley’s Accountants, we:
- Review your residence history to see if you’ll become a long-term UK resident.
- Analyse current and future IHT exposure on UK and non-UK assets.
- Recommend and implement strategies that use allowable reliefs and minimise risk under the new rules.
- Advise on trust restructuring or winding-up where needed.
Final Thoughts
The 2025 IHT changes were among the most significant in decades, and they will have affected many families, especially those with cross-border assets or trust arrangements. With careful planning and proactive review, you can continue to use tax relief strategies and protect more of your wealth.
If you’d like advice on this, or any aspect of your finances, contact our experienced team here at Dunkley’s Accountants. Call us or book a consultation online to get started on 01454 619900 or email advice@dunkleys.accountants.