UK Inheritance Tax in Australia: What UK Expats Need to Know

Australia does not currently impose an inheritance or estate tax, but this does not remove potential UK IHT exposure. UK-sited assets can remain within the IHT net, while assets elsewhere in the world may also be exposed depending on your UK residence history.

The rules changed substantially on 6 April 2025, when the UK moved from a domicile-based framework to a residence-based system for determining the IHT treatment of non-UK assets. Further changes affecting pensions take effect from 6 April 2027.

Australian tax consequences can also arise for an estate or its beneficiaries in relation to inherited assets, income and subsequent disposals. Estate planning therefore needs to take account of both jurisdictions.

In this guide, we explain when UK IHT can still apply after a move to Australia, how the long-term residence rules work and which assets and estate-planning decisions require particular attention.

Do I Pay UK Inheritance Tax If I Live in Australia?

You can still be liable for UK inheritance tax while living in Australia.

Australian tax residence does not determine your UK IHT position on its own. UK-sited assets can remain within the IHT net after you leave the UK. Your non-UK assets, including assets in Australia, may also remain exposed where your residence history brings you within the UK’s long-term residence rules.

Whether IHT is actually payable depends on the value and composition of your estate, together with any exemptions, nil-rate bands and reliefs available.

The starting point is your UK residence history, the legal location of your assets and the way your estate is structured.

How the UK Long-Term Residence Rules Affect Expats in Australia

Prior to April 2025, UK IHT liability on non-UK assets was largely determined by an individual’s domicile or deemed domicile status.

From 6 April 2025, the Finance Act 2025 replaced this system with a residence-based regime for determining whether non-UK assets are within the scope of IHT. The key concept is now long-term UK residence.

Broadly, you are a long-term UK resident if you have been a UK resident for at least 10 of the 20 tax years immediately preceding the tax year in which the relevant IHT charge arises.

The distinction can have a substantial effect on the assets within scope:

1. If you are a long-term UK resident, non-UK assets can fall within the scope of IHT. This can include Australian property, investments and bank accounts.
2. If you are not a long-term UK resident, your exposure is generally restricted to UK-sited assets.

There are transitional rules for some individuals who were already non-UK residents when the new regime began. Different rules can apply to certain people who were non-UK domiciled or deemed domiciled and non-UK residents in 2025/26. UK expats who left before 6 April 2025 should therefore check their residence history and transitional position rather than relying on the 10-out-of-20 test alone.

An individual’s UK tax residence status for any given year is determined by the Statutory Residence Test (SRT), which considers factors including the number of days spent in the UK, the availability of a UK home and connections such as family or employment.

Becoming an Australian tax resident does not automatically determine whether you remain a long-term UK resident for IHT purposes.

For more detail on the move from domicile to residence-based IHT rules, see our guide to UK inheritance tax planning for expats.

How Long Can UK IHT Apply After You Leave the UK?

For people who fall within the long-term residence rules, non-UK assets can remain within the UK IHT net for a period after UK residence ends.

Broadly, this post-departure period ranges from three to ten tax years depending on the individual’s previous UK residence history.

Transitional provisions can alter this position for some people who were already living outside the UK when the new rules took effect.

Consider two British expats who are both Australian tax residents and hold substantial Australian investments. One remains within the applicable post-departure period because of their previous UK residence history. Their Australian investments may remain within the UK IHT net.

The other has been outside the UK for long enough for the relevant tail period to expire. Their non-UK assets would generally fall outside UK IHT, although UK-sited assets can remain within scope.

What Determines Your UK IHT Exposure After Moving to Australia?

Residence history is only part of the assessment. Asset ownership, family circumstances and estate structures can alter the eventual position.

Two people with estates of similar value can therefore have very different IHT positions.

What UK IHT Allowances Can Apply to Your Estate?

IHT is generally charged at 40% on the part of an estate above the available nil-rate bands after applicable exemptions and reliefs have been taken into account.

The standard nil-rate band currently stands at £325,000 per individual. An additional residence nil-rate band (RNRB) of up to £175,000 may apply where a qualifying residence is closely inherited by direct descendants.

For a long-term UK resident whose worldwide estate falls within the IHT regime, a qualifying residence does not necessarily have to be in the UK. For someone whose IHT exposure is generally limited to UK assets, the residence would need to be in the UK to form part of the relevant IHT estate.

The RNRB is subject to several conditions. The deceased must have owned a qualifying residential interest that was their residence at some point, and the property must pass to direct descendants within the rules. Where the estate exceeds £2 million, the RNRB is reduced by £1 for every £2 above the threshold. Downsizing provisions can also preserve some or all of the allowance in qualifying circumstances.

Where both spouses or civil partners qualify, unused standard nil-rate band and RNRB can potentially be transferred to the survivor. A qualifying couple can therefore potentially pass up to £1 million before IHT becomes payable.

The £1 million figure is not an automatic exemption. It assumes that both £325,000 nil-rate bands and both £175,000 residence nil-rate bands are fully available and that the relevant conditions are satisfied.

Why Different UK Residence Histories Between Spouses Matter

Couples who moved to Australia together should not assume that their IHT positions are identical.

From 6 April 2025, where the person making a transfer is a long-term UK resident but their spouse or civil partner is not, the usual spouse exemption can be restricted. This requires particular attention where one partner spent substantially longer in the UK before the move to Australia, or where one spouse has returned to or spent more time in the UK.

Consider a couple living in Sydney who own an Australian home and investment portfolio alongside a UK property. One spouse has a lengthy UK residence history and remains a long-term UK resident, while the other does not.

Their exposure cannot be assessed simply by treating them as an Australian-resident couple. The residence position of each spouse, ownership of the assets and intended succession arrangements need to be considered separately.

Which UK Assets Remain Subject to IHT When You Live in Australia?

UK-sited assets can remain within the UK IHT net even after you cease to be a long-term UK resident.

The legal location, or situs, of an asset is therefore important. The eventual tax position also depends on the type of asset, how it is legally owned and whether exemptions or reliefs apply.

A common misconception is that moving an investment account offshore necessarily changes the IHT position. It may not. The location of the custodian, investment platform or bank is not always the same as the legal situs of the underlying assets.

The main asset classes to review are:

• UK property
• UK investment holdings
• Business interests
• UK pensions

How UK Property Is Treated for IHT When You Live in Australia

UK real estate is a UK-sited asset and can remain within the IHT net regardless of where the owner lives.

This can include:

• A former UK main residence retained after emigrating
• Buy-to-let or investment property
• Inherited UK property that has not been sold
• A share of jointly owned UK property

Whether property is owned personally, jointly or through a company can affect its IHT treatment. Expats retaining or considering UK property should also assess the investment, ownership and tax implications within their wider cross-border plan. See our guide to property investment for expats.

If a UK property is held through a company, the individual owns shares in the company rather than the property directly. Shares in a UK-incorporated private company are generally UK-sited for IHT purposes.

If the company mainly holds investments or investment property rather than carrying on a qualifying trading business, Business Relief may not be available.

How UK Investments Can Remain Within the IHT Net

Investment situs is more complicated than the location of an investment account or the exchange on which an investment trades.

For shares and other registered securities, factors such as the company concerned and the place where ownership must be registered can be relevant. Listing on a UK exchange does not, by itself, make every security traded there a UK-sited asset for IHT purposes.

The legal vehicle also matters for collective investments and funds. An investor should therefore establish the situs of the particular assets held rather than assume that an offshore platform makes the investment non-UK or that a UK investment platform makes every holding UK-sited.

Certain qualifying business shares can attract Business Relief. From 6 April 2026, qualifying AIM shares generally receive Business Relief at 50%, rather than the 100% relief that generally applied before that date. The relevant qualifying conditions still need to be met.

How Business Relief Can Affect UK Business Interests

UK business assets may qualify for Business Relief, including a business or an interest in a business and shares in an unlisted company.

For deaths on or after 6 April 2026, 100% Agricultural and Business Relief is subject to a combined £2.5 million allowance for qualifying property. Once the available 100% allowance has been used, the qualifying value above it generally receives 50% relief.

Where a spouse or civil partner has died previously without using all of their £2.5 million allowance, the unused amount can potentially be transferred to the surviving spouse or civil partner. This means the available 100% allowance can, in qualifying circumstances, reach £5 million.

The availability of relief depends on the nature of the business, ownership period and relevant statutory conditions. A UK connection alone does not make a business interest eligible.

How the 2027 Pension IHT Changes Affect UK Expats in Australia

For Australian residents with substantial UK pension wealth, the changes taking effect from 6 April 2027 can alter the balance of an estate plan.

Under the rules applying before 6 April 2027, unused funds in most discretionary UK pension schemes can generally pass to beneficiaries without forming part of the member’s estate for IHT purposes. Treatment depends on the scheme and type of death benefit.

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of the deceased person’s estate for IHT purposes. Certain benefits remain outside the reform, including death-in-service benefits payable from registered pension schemes and certain dependant’s scheme pensions.

This can change the role a UK pension plays within the wider estate. Someone who previously expected to draw on non-pension assets while retaining a UK pension for beneficiaries may need to reconsider that approach alongside their other UK and Australian assets.

Inclusion of pension wealth in the estate does not mean that IHT will necessarily be payable in every case.

If you hold a UK pension while living in Australia, our guide to UK pensions for expats in Australia explains the wider cross-border pension considerations.

Does the UK–Australia Double Taxation Convention Cover Inheritance Tax?

No. The UK–Australia Double Taxation Convention (DTC) does not provide broad protection against UK inheritance tax.

The 2003 UK–Australia Double Taxation Agreement is principally an income and capital gains convention. Inheritance tax is not one of the UK taxes covered by it. Unlike the UK’s estate tax convention with the United States, there is no equivalent UK–Australia inheritance or estate tax treaty providing broad bilateral relief from UK IHT.

Because Australia does not ordinarily impose a tax on the inheritance or estate itself, there will also generally be no Australian death duty against which UK unilateral IHT relief could be claimed.

Inherited assets can still produce Australian tax consequences.

An Australian-resident beneficiary may face Australian Capital Gains Tax (CGT) when an inherited asset is later disposed of. The cost base is not automatically reset to market value at the date of death in every case. Treatment depends on the circumstances, including when and how the deceased acquired the asset and, for residential property, the relevant inherited-property and main-residence rules.

Income produced by inherited assets may also have Australian tax consequences. Rental income from a UK property or dividends from UK shares, for example, may need to be included in an Australian-resident beneficiary’s assessable income. Where tax has also been paid overseas, a foreign income tax offset may be available in Australia, subject to the applicable rules.

The planning question is therefore wider than whether an inheritance tax treaty applies. UK estate exposure needs to be considered alongside the Australian treatment of beneficiaries, inherited property, trusts and later disposals.

UK IHT Exposure and Australian Tax Consequences

The same asset or planning decision can raise different questions in each jurisdiction.

Changes made to improve a UK IHT position should therefore be considered from an Australian tax and legal perspective as well.

Practical Inheritance Tax Planning for UK Expats in Australia

Effective cross-border IHT planning starts with the individual’s residence history, intended beneficiaries and asset profile. The objective is to establish which assets remain exposed, whether that exposure is expected to change and whether the current ownership and estate structure remains appropriate.

Planning measures can include:

1. Reviewing ownership of UK-sited assets
2. Making lifetime gifts where appropriate
3. Using trusts where their tax and succession consequences are understood
4. Using insurance to provide liquidity for a potential IHT liability

No single strategy is suitable in every case. UK and Australian tax considerations should be coordinated, especially where trustees, beneficiaries or family members are spread across jurisdictions.

For a broader discussion of the available options, see our guide to inheritance tax planning.

Reviewing Ownership of UK-Sited Assets

The legal and beneficial ownership of UK property can affect succession, the composition of the taxable estate and the availability of reliefs such as the RNRB.

Joint ownership should not be changed simply to obtain an assumed IHT advantage. A joint tenancy can limit succession flexibility because the deceased’s interest normally passes automatically to the surviving owner, while tenants in common generally hold distinct shares that can be directed under their wills. Unused nil-rate band and RNRB can also potentially transfer between spouses or civil partners.

For an Australian-resident couple, the analysis should take account of each spouse’s long-term UK residence position and the Australian consequences of changing ownership.

Consider a couple who own a UK property alongside their Australian home and investment portfolio. If one spouse remains a long-term UK resident and the other does not, restructuring ownership solely by reference to the UK property may overlook their different IHT positions and the Australian consequences of the change.

Any restructuring should therefore be assessed against the family’s intended succession arrangements and its position in both jurisdictions.

Lifetime Gifting

Structured gifting can reduce an estate’s IHT exposure in appropriate circumstances. Larger outright gifts to individuals are commonly treated as potentially exempt transfers (PETs) and are generally outside the estate if the donor survives for seven years, provided no separate rule brings them back into charge.

If the donor dies within seven years, a failed PET is taken into account when calculating IHT. Taper relief can reduce the tax attributable to some chargeable gifts made more than three years before death, but it does not reduce the value of the gift itself.

Several exemptions may also be relevant. These include the £3,000 annual exemption, small gifts of up to £250 in qualifying circumstances and the normal expenditure out of income exemption where the statutory conditions are met.

Records of gifts should be retained so that personal representatives can establish the IHT position if required.

The UK seven-year rule should not be considered in isolation if you are resident in Australia. The Australian consequences of transferring the relevant asset also need to be established before a gift is made.

Different UK rules apply to transfers into many trusts, and retaining a benefit from an asset after giving it away can prevent the intended IHT result.

Using Trusts in Cross-Border Estate Planning

Trusts can be useful in cross-border estate planning, but their UK IHT treatment depends heavily on the type of trust, the assets involved and the settlor’s long-term UK residence status. They should not be treated as a generic way of removing assets from IHT.

Under the rules applying from 6 April 2025, non-UK assets in an excluded property trust can qualify as excluded property while the relevant settlor is not a long-term UK resident, subject to the detailed rules.

Excluded-property status is no longer necessarily fixed when assets are settled. If a living settlor later becomes a long-term UK resident, non-UK assets previously placed into the settlement can come within the relevant-property IHT regime. If the settlor later ceases to be a long-term UK resident, the treatment can change again.

Transfers into many relevant-property trusts can give rise to an immediate lifetime IHT charge for long-term UK residents. Relevant-property trusts can also remain subject to charges on ten-year anniversaries and when property leaves the trust.

The settlor’s UK residence history, location of the assets and tax position of trustees and beneficiaries all need to be considered. Australian trust taxation adds another consideration where the settlor, trustees, beneficiaries or assets have Australian connections.

Insurance-Based Liquidity Planning

Where an IHT liability cannot be fully addressed through other planning, life insurance can provide liquidity towards the tax bill.

IHT is generally due by the end of the sixth month after the month in which the death occurs. Where an estate contains substantial illiquid assets, such as UK property or business interests, finding the cash to meet the liability can create practical problems.

Certain qualifying assets can be eligible for IHT to be paid by annual instalments over ten years, although interest can apply and the outstanding tax may become payable if the asset is sold.

A suitably structured life insurance policy written in trust may allow policy proceeds to be made available outside the deceased’s estate to help meet an IHT liability without waiting for the estate to be administered.

This can be relevant where beneficiaries intend to retain UK property or business interests. Insurance provides liquidity for the liability; it does not remove the underlying IHT exposure.

Do UK Expats in Australia Need to Review Their Wills?

UK expats with assets in both countries should consider whether their wills and wider succession arrangements remain suitable after moving to Australia.

The interaction between UK and Australian wills, ownership structures, executors and estate-administration procedures can become more complicated where an estate spans both jurisdictions. Our guide to UK estate planning provides further information on structuring and passing on UK assets.

Particular care may be needed where there are UK properties, trusts, business interests or family members in different countries.

Changes to asset ownership or estate-planning structures should also be reflected in the relevant succession documents. Cross-border wills and succession arrangements are legal matters, so appropriate UK and Australian legal advice should be obtained when reviewing them.