A family home in Italy. A bank account in Switzerland. A portfolio held offshore. A pension never touched. A company built over thirty years.
For many internationally mobile families, wealth is not held in one country. It is layered across jurisdictions, currencies, legal systems and family histories. The problem is that inheritance tax does not respect sentiment. It follows legal connection, residence, asset location, treaty rules, and timing.
And from a UK perspective, the rules have changed materially.
For years, many non-UK domiciled individuals took comfort from the idea that foreign assets were outside the UK inheritance tax net. That comfort is now much less reliable. From 6 April 2025, the UK moved away from the old domicile-based inheritance tax framework and introduced a new long-term UK residence test. Broadly, once an individual is long-term UK resident, non-UK assets may be brought within the scope of UK inheritance tax. HMRC guidance confirms that a person is long-term UK resident if they have been UK tax resident for either the previous 10 consecutive tax years or for 10 or more of the previous 20 tax years.
That is the new reality: the overseas villa, the Italian inheritance, the foreign investment account, the offshore structure and, in time, even pension wealth may need to be considered together as part of one global estate plan.
The emotional mistake: “It is abroad, so it is not a UK problem”
This is the sentence we hear most often.
A client has lived in London for many years but still owns an apartment in Milan. Another has inherited part of a family property in Puglia. A third has an offshore portfolio created before moving to the UK. The family assumption is simple: the asset is outside the UK, so the UK should have nothing to do with it.
That assumption can be expensive.
UK inheritance tax is not only about where an asset physically sits. It is about whether the person is within the UK inheritance tax net and whether the asset is chargeable, excluded, relieved, protected by treaty, or subject to foreign tax credit. The situs of an asset still matters, but it is only one part of the analysis. HMRC’s own manual states that situs is important because it may determine whether an asset is excluded property and whether double taxation treaty relief applies.
In cross-border estates, the dangerous cases are rarely the obvious ones. They are the estates where the family thinks everything is “simple” because there is a will, or because the foreign property has been in the family for decades, or because no income has ever been remitted to the UK.
Inheritance tax planning must start with a map: where the person is resident, how long they have been resident, where the assets are located, how they are owned, who will inherit them, whether trusts or companies are involved, and whether foreign tax will also arise.
The new UK IHT trigger: long-term residence
The old non-dom language has not disappeared from everyday conversation, but for UK inheritance tax purposes the centre of gravity has shifted. From 6 April 2025, the domicile and deemed domicile rules were replaced by long-term UK residence rules. HMRC states that if a person is long-term UK resident, their overseas assets may be subject to inheritance tax if they make a transfer of assets or die.
The practical consequence is significant. A person who has lived in the UK for many years may now be within UK inheritance tax on worldwide assets even if they still feel culturally, emotionally and economically connected to another country.
Leaving the UK does not necessarily switch the exposure off immediately. HMRC guidance confirms that a long-term UK resident can remain within the UK inheritance tax scope for up to 10 tax years after leaving the UK, with a shorter tail where the person has not lived in the UK for all of the previous 20 years.
That matters for families planning a return to Italy, Switzerland, the UAE, Portugal or elsewhere. Moving country may be part of the succession strategy, but the timing must be calculated, not assumed.
The numbers are simple. The planning is not.
The standard UK inheritance tax rate remains 40% on the value of an estate above the available threshold. HMRC confirms that inheritance tax is charged only on the part of the estate above the threshold and gives the standard rate as 40%.
The ordinary nil-rate band is £325,000. The residence nil-rate band is £175,000, subject to conditions, including the requirement that a qualifying residence passes to direct descendants. The residence nil-rate band is tapered where the net value of the estate exceeds £2 million. HMRC’s policy paper states that the nil-rate band is £325,000, the residence nil-rate band is £175,000 and the taper starts at £2 million.
For married couples and civil partners, unused nil-rate band and residence nil-rate band may be transferable, which can produce the familiar headline figure of up to £1 million for qualifying estates. But this is not automatic in every case. Cross-border families can lose value through poor drafting, wrong ownership structures, non-qualifying assets, foreign forced heirship issues, or misunderstanding how the residence nil-rate band applies.
The tax rate is easy to quote. The estate plan is not.
The Italian property problem
For many UK-resident Italian families, the problem often begins with an asset that nobody thinks of as an “investment”: the Italian family home.
It may be used for holidays. It may be owned with siblings. It may have been inherited years ago. It may be held partly in usufruct and partly in nuda proprietà. It may have a cadastral value that bears little resemblance to market value. It may be subject to Italian succession procedures and, at the same time, need to be reported for UK inheritance tax purposes.
The UK and Italy do have an estate duty/inheritance tax convention, but it is not a simple “no double tax” shield. HMRC’s manual confirms that where double taxation credit is claimed for Italian tax, HMRC will require evidence of the Italian tax assessment, the assets on which Italian tax was charged, their value and evidence of payment. It also states that the UK-Italy convention covers UK inheritance tax due on death but not immediately chargeable lifetime transfers.
That last point is often missed. A lifetime transfer of an Italian asset may not be protected in the same way as a death event. This is one reason why gifting foreign assets should not be done casually.
A transfer that looks tax-efficient in Italy may create a UK inheritance tax issue. A gift that appears outside the UK because the asset is foreign may still be relevant if the donor is within the UK IHT net. A transaction designed for succession purposes may also trigger capital gains tax, reporting obligations, valuation issues and foreign legal consequences.
Cross-border planning is not about choosing UK law or Italian law. It is about making the two systems speak to each other before the family is forced to do so under pressure.
Gifts: the seven-year rule is not a complete plan
Many families know the phrase “seven-year rule”. Fewer understand its limits.
HMRC guidance confirms that, broadly, no inheritance tax is due on gifts if the donor survives seven years, unless the gift is part of a trust. If the donor dies within seven years, the inheritance tax consequences depend on timing and value. Gifts made within three years of death may be taxed at 40%, with taper relief potentially applying after three years, but only in the relevant circumstances.
The more dangerous trap is the gift with reservation of benefit. If someone gives away an asset but continues to benefit from it, HMRC guidance states that the asset can still count as part of the estate.
This is especially relevant for foreign property. A parent transfers the Italian holiday home to the children but continues to use it every summer. The family thinks the asset has left the estate. The UK analysis may be very different.
A good IHT plan is not “give everything away and survive seven years”. A good plan asks: what is being given, to whom, when, on what terms, with what retained benefit, in which country, under which valuation, and with what foreign tax and legal consequences?
Trusts and offshore structures: old planning may need urgent review
Trusts remain powerful, but they are also technical and increasingly exposed to rule changes.
HMRC guidance on the new long-term residence rules states that inheritance tax will be charged on overseas assets in a trust that the individual has set up or added to, even where the trust was created when the individual was not long-term UK resident, subject to specific transitional conditions for certain assets.
This does not mean every trust has failed. It means trust planning must now be reviewed with precision. The key questions include when the trust was created, whether the settlor was non-UK domiciled at the time, what assets were settled, whether assets were overseas on 30 October 2024, whether they remain overseas, and whether the settlor is or becomes long-term UK resident.
For internationally mobile families, the biggest risk is inertia. A structure created fifteen years ago may no longer produce the result the family expects.
Business assets and farms: relief is changing
Business Property Relief and Agricultural Property Relief have historically been central to UK succession planning. However, reforms are coming.
From 6 April 2026, a new £2.5 million allowance is expected to apply to the combined value of qualifying agricultural and business property attracting 100% relief, with 50% relief applying above that level. HMRC states that unused allowance can be transferred to a surviving spouse or civil partner and that the reforms affect estates, chargeable lifetime transfers and trusts.
This is particularly important for families with trading companies, family businesses, farms, investment-heavy companies, or shares admitted to trading on markets such as AIM or foreign exchanges. A shareholding that once looked “covered” may need to be revalued in light of the new cap, ownership history, trading status and succession route.
For entrepreneurs, the IHT plan cannot be separated from the corporate tax plan, the shareholder agreement, the family governance plan and the exit strategy.
Pensions: the next major shock
Pensions have often been treated as a valuable IHT planning tool. That position is changing.
HMRC confirms that most unused pension funds and death benefits will be brought into the scope of inheritance tax from 6 April 2027, although death in service benefits payable from a registered pension scheme will be excluded. Personal representatives will be responsible for reporting and paying IHT due on unused pension funds and pension death benefits.
For high-net-worth families, this is not a footnote. It may materially change how wills, nomination forms, liquidity planning, life cover and pension drawdown strategies should be reviewed.
A family that is “asset rich but cash poor” may find that the IHT liability is not only larger than expected, but also harder to fund.
Double tax relief is helpful, but it is not a strategy
Where two countries tax the same estate or asset, double tax relief may be available. HMRC explains that the UK has bilateral conventions for taxes on estates, gifts and inheritances, and that unilateral relief may be available where there is no convention. HMRC also confirms that treaties with France, Italy, India and Pakistan pre-date 1975 and have different rules.
Relief is not the same as prevention. It may require evidence, timing, formal claims, valuations and proof of foreign tax paid. It may not cover every transfer. It may be capped. It may apply differently depending on the asset, the country and the legal route used.
The best cross-border IHT planning reduces uncertainty before death. It does not leave executors to reconstruct the tax position after death with documents in several languages, assets in several jurisdictions and beneficiaries under emotional pressure.
What international families should do now
The starting point is not a will. The starting point is a cross-border estate audit.
A proper review should identify the person’s UK residence history, expected long-term residence status, domicile history where still relevant for treaty and transitional points, asset situs, ownership structure, wills, trusts, pensions, life policies, business assets, foreign succession rules, tax treaties, liquidity and family objectives.
Then the planning can begin.
For some families, the answer may be lifetime giving. For others, it may be a trust review, a corporate restructuring, revised wills, life assurance, shareholder planning, pension nomination updates, or coordinated UK and foreign tax advice. For internationally mobile individuals, timing a departure from the UK may also be relevant, but it must be planned against the long-term residence tail.
The worst plan is no plan. The second-worst plan is a domestic plan pretending the foreign assets do not exist.
The Vectigalis Tax approach
At Vectigalis Tax, we advise UK and international families on inheritance tax, cross-border estates and succession planning where assets, family members and tax exposure sit in more than one country.
Our work is particularly relevant for UK residents with Italian, European or international assets; non-UK individuals who have lived in the UK for many years; families with offshore portfolios or trusts; entrepreneurs with business assets; and individuals who need a coordinated UK and foreign succession strategy.
The purpose is not simply to reduce tax. It is to prevent avoidable tax, avoid family disputes, preserve liquidity, align the legal documents across jurisdictions and ensure the estate plan works when it is actually needed.
If you hold assets in more than one country, your inheritance tax exposure should not be reviewed country by country in isolation. It should be reviewed as one estate, one family plan and one succession strategy.
For a confidential review, contact info@vectigalistax.co.uk or visit www.vectigalistax.co.uk.