Expats’ Guide to Estate Planning in the UK

However, the estate planning process can be complex, particularly without a comprehensive understanding of applicable tax rules.

This is especially true for UK expats who must navigate cross-border regulations and varying inheritance tax laws across jurisdictions.

This guide will highlight the importance of estate planning for UK expats, explore relevant estate taxation laws, and offer practical strategies to facilitate a smooth and tax-efficient transfer of wealth to your chosen beneficiaries.

What Is Estate Planning in the UK?

Estate planning is the process of protecting, managing, and distributing your assets to your chosen beneficiaries according to your wishes in the event of incapacity or death. Assets that may form part of your estate include:

• Cash
• Investments
• Property
• Savings
• Pensions
• Life insurance policies

How Is Estate Taxed in the UK?

Your estate is subject to a 40% inheritance tax (IHT) rate on the value of your taxable assets exceeding the £325,000 nil-rate band. However, no IHT will be due if you transfer the portion of your estate above this threshold to one of the following parties:

1. Your spouse
2. Your civil partner
3. A charity
4. A community amateur sports club

The nil-rate band increases to £500,000 if you transfer your home to your children, including foster, adopted, and stepchildren. Meanwhile, the IHT rate decreases to 36% if you leave at least 10% of your estate’s net value to charity.

You may also choose to gift portions of your estate to your beneficiaries during your lifetime. If you survive for seven or more years after making the gift, the transferred assets will be exempt from IHT. However, IHT liability may arise if you pass away within seven years of making the gift, depending on the following factors:

• Your relationship to the beneficiary: Transferring a part of your estate as a gift to your spouse or a civil partner is tax-free as long as they permanently live in the UK and you are legally married or in a civil partnership. Gifts to persons other than your spouse may be taxed.
• The timing of the gift: Taper relief of up to 32% applies if the gift was given 3–7 years before your death, and the total value of gifts made within the seven-year period exceeds the £325,000 tax-free threshold.
• The value of the gift: The higher the value of your gift, the more likely you are to exceed the nil-rate band.

If you die while based abroad, you’re typically only subject to IHT on UK-situs assets, meaning you won’t have to pay tax on overseas pensions, foreign currency accounts with a bank or the Post Office, and funds in open-ended investment companies and authorised unit trusts.

If you have lived in the UK for fewer than 10 years in the previous 20 years, you will be considered as based abroad.

Long-Term Residence (LTR) Rules

On 6 April 2025, the UK’s inheritance tax (IHT) regime shifted from a domicile-based system to a residence-based one.

Under the new rules, individuals who have been a UK tax resident for at least 10 of the previous 20 tax years will be classified as long-term residents (LTRs). Once classified, they will be subject to UK IHT on their worldwide assets regardless of their domicile status.

Even after ceasing UK tax residence, LTRs will remain liable to UK IHT for a “residence tail” period of between 3 and 10 years, depending on how many years they were previously UK resident.

This means that if you leave the UK after being classified as an LTR, your worldwide estate may still be taxed in the UK for up to a decade.

The change significantly affects UK expats and globally mobile individuals. It is now essential to review both your residency history and future plans to understand your exposure to UK inheritance tax and implement appropriate estate planning strategies.

What Does UK Estate Planning Include?

Efficient expat estate planning requires a clear understanding of how inheritance tax applies to your UK-based and worldwide estate, enabling you to develop an asset distribution strategy that minimises tax liability. It also involves the employment of key instruments of estate planning, including:

1. Creating a will
2. Obtaining a grant of probate
3. Appointing a power of attorney

Creating a Will

The primary purpose of a will, also known as the last will and testament, is to declare your intentions regarding the administration and distribution of your assets. This legally binding document allows you to designate individuals, organisations, or charities to whom you wish to leave portions of your estate.

While creating a will is not legally required, passing away without one may result in your assets being distributed according to the intestacy succession laws of the jurisdictions in which they are held. These laws typically prioritise close relatives, such as your spouse and children, and can exclude friends and other non-relatives you may have intended to include in your estate plans.

It’s highly advisable to appoint a will executor to administer your estate upon your death. This can be a friend, family member, or a professional, like a solicitor, who is in charge of liquidating and transferring your assets, distributing the estate according to your wishes, and applying for a grant of probate.

Professional expat financial advisers, like those available at Titan Wealth International, provide expert will-writing services that consider your family dynamics and cross-border financial circumstances to ensure your will aligns with your estate planning objectives.

Obtain a Grant of Probate

The grant of probate is a legal document that authorises the appointed executor to administer your estate in accordance with your will. You may have to obtain a grant of probate if you’re a high-net-worth expat with substantial assets you intend to transfer to your beneficiaries. However, you won’t need a grant of probate in the following circumstances:

1. Your assets only include savings
2. You’re a co-owner of shares or cash
3. You own land or property as a joint tenant

In the last two cases, the assets are automatically passed on to the surviving owners.

Appointing a Power of Attorney

A lasting power of attorney (LPA) is a legal document that allows a designated person (usually a family member) to act on your behalf in legal and financial matters should you become physically or mentally incapacitated. Establishing an LPA enables greater control over the management and protection of your estate in the event of illness or other unforeseen circumstances.

There are two types of LPA, each covering distinct areas of decision-making:

1. Health and welfare: Enables an appointed individual to make decisions about your medical care.
2. Property and financial affairs: Provides your attorney with the authority to manage your finances.

You’re allowed to choose one or both types of LPAs, and you may utilise them at any time once they’re registered with the Office of the Public Guardian.

What Are the Essential Estate Planning Considerations for UK Expats?

Estate planning may be particularly complex for UK expats, as it requires navigating local and international tax laws to ensure compliance while minimising tax liability. To develop an effective estate plan as an expat, it’s crucial to consider the following factors:

1. Residency and domicile
2. Cross-border estate laws
3. Double tax treaties

Residency and Domicile

Your domicile status has traditionally influenced how the UK’s inheritance tax is applied to your estate. Expats who were not domiciled in the UK were generally liable for IHT only on their UK-based assets, whereas those domiciled in the UK were subject to IHT on their worldwide estate.

You were typically considered a UK non-dom if you or your father were born outside the UK or you permanently moved overseas and obtained a new domicile by choice.

On 6 April 2025, HMRC introduced a new regime that determines your IHT liability based on residence rather than domicile. Individuals considered long-term residents (LTRs) in the UK are now liable for IHT on their global assets, regardless of their previous domicile status. Meanwhile, non-LTRs are subject to IHT only on their UK-based estate.

The new LTR rules state the following:

• You’re considered an LTR in the UK if you were a tax resident for at least ten of the previous 20 tax years.
• If you leave the UK as an LTR, you will still be liable for IHT on your global estate for ten years following the year of your departure.
• Those who have been UK non-residents for ten consecutive tax years will cease to be LTRs, resetting the 20-year residency requirement.

You won’t be considered an LTR if one of the following conditions applies:

• You didn’t have a UK domicile or deemed domicile status on 30 October 2024.
• You are a UK non-resident in the tax year running from 6 April 2025 to 5 April 2026.
• You live abroad and don’t return to the UK.

Cross-Border Estate Laws

While wills created in the UK are recognised in many countries, it’s crucial for expats to understand how local succession laws and tax regulations may impact their estate distribution, particularly if they hold assets overseas.

Even if your UK will is recognised in a foreign jurisdiction, it doesn’t mean your estate will be distributed according to your wishes as some countries, like France, Spain, and the UAE, have forced heirship laws. These laws state that a portion of your estate must be transferred to specific relatives, such as your spouse or children.

Additionally, if you own any real estate abroad and want to transfer it to your heirs, its distribution is typically managed according to the succession laws of the jurisdiction in which the property is located.

Therefore, it’s advisable to create separate wills—one in the UK and another in a country where you hold foreign assets—to streamline the succession of your estate and ensure it aligns with your preferences.

Double Tax Treaties

If both the UK and the jurisdiction where your foreign assets are located have the right to impose tax on your inheritance, you may be able to utilise a double taxation agreement (DTA). A DTA allows you to offset the taxes paid in a foreign country against your IHT liability in the UK, thus mitigating or eliminating the risk of double taxation.

The UK has a DTA with over 100 countries, some of which impose inheritance tax on expats. These include the following:

Which Strategies Can You Leverage To Streamline Estate Planning in the UK?

You may employ the following estate planning strategies to minimise IHT exposure and transfer as much wealth as possible to your beneficiaries:

1. Establish trusts
2. Transfer assets as a gift
3. Leverage your pensions properly

Establish Trusts

Establishing a trust is a key estate planning strategy that enables you to reduce inheritance tax, limit the state control of your assets, and bypass the costly probate process. These legal arrangements provide more control over how your assets are managed and transferred to your beneficiaries.

When you establish a trust, you become its settlor and are responsible for appointing a trustee (a trusted family member, friend, or company) who manages the fund for the benefit of the beneficiaries. You can opt for a revocable trust, which enables you to maintain control over the assets during your lifetime, or an irrevocable trust, which can’t be changed once established.

Types of Trusts

There are several types of trusts you can consider depending on your estate planning needs and goals, as outlined in the table below:

While trusts settled by UK long-term residents are subject to inheritance tax, trusts established by UK non-LTRs with overseas assets won’t be liable for IHT, as they’re regarded as excluded property trusts. However, if you gain or regain LTR status, the trust will become subject to taxation.

Transfer Assets as a Gift

Gifts made to your beneficiaries are exempt from IHT if you survive for more than seven years following the date of the gift. You may further reduce your IHT liability by utilising the annual exemption. This allowance enables you to gift up to £3,000 each tax year without the amount being added to the value of your estate for IHT purposes.

You can transfer the gifts worth a total of £3,000 to one person or split them between multiple people. If the full allowance is not used in a given tax year, the remaining portion may be carried forward to the following year. However, you may do a rollover only for one tax year.

Additionally, gifts between spouses or civil partners are tax-free, and giving a portion of the estate to charity can reduce your IHT rate to 36%.

Leverage Your Pensions Properly

Pensions aren’t considered a part of your estate in the UK, meaning they’re currently exempt from IHT. However, since most wills don’t cover pensions, it’s advisable to complete a nomination form to ensure your pension is transferred to your chosen beneficiaries.

If you die before age 75, your beneficiary will receive the pension funds tax-free up to the lump sum and death benefit allowance (LSDBA) of £1,073,100. If you’re over 75 when you die, the beneficiary will have to pay income tax on withdrawals at their marginal income tax rate.

Expats who die while based abroad can transfer their overseas pension to their heirs free of IHT in the UK.

Pensions and IHT from April 2027

From 6 April 2027, virtually all unused funds in defined contribution (DC) and defined benefit (DB) pensions will be included in your estate and subject to IHT at 40%, above the tax-free limit of £325,000.

Pension scheme administrators are required to report and pay IHT within 60 days of death. While transfers to spouses remain IHT‑exempt, others should consider drawing or gifting pension funds earlier to mitigate this new charge