IHT: Inheritance Tax

Inheritance Tax (IHT) is levied by HMRC on the value of a person's estate when they die. Under the Inheritance Tax Act 1984, the tax is charged at a flat rate of 40% on the portion of the net estate that exceeds the nil-rate band (NRB), which is set at £325,000 for 2026/27. A residence nil-rate band may also apply when a main residence is passed to direct descendants, though it is tapered away at a rate of £1 for every £2 where the net estate exceeds £2 million.\n\nTwo key reliefs - Agricultural Property Relief (APR) and Business Property Relief (BPR) - have historically allowed qualifying business and agricultural assets to receive 100% IHT relief. From 6 April 2026, following reforms announced in the Autumn 2024 Budget, a £2.5 million cap per individual applies to the amount of qualifying assets that receive 100% APR or BPR relief. Any qualifying value above £2.5 million receives 50% relief, creating an effective 20% IHT charge on the excess.\n\nDomicile is the central concept for IHT exposure. A UK-domiciled individual is liable to IHT on worldwide assets. A non-domiciled individual is, in principle, liable only on UK-sited assets. Domicile is a common-law concept distinct from tax residence or nationality, and its determination can be complex. Consult a qualified cross-border tax adviser before drawing any conclusions about your own domicile status.

Many British expats living in the GCC assume that leaving the UK removes their IHT exposure. That is not automatically the case. Domicile of origin - typically the country where your father was domiciled at the time of your birth - is difficult to shed. HMRC applies a deemed domicile rule under the Finance Act 2013 (Schedule 45), meaning that individuals who have been UK-resident for 15 of the previous 20 tax years are treated as UK-domiciled for IHT purposes, even if they are resident in the UAE, Saudi Arabia, Qatar, or elsewhere in the GCC. This means worldwide assets can remain within scope of UK IHT long after relocating to the Gulf.\n\nFor expats with UK property, investment portfolios held with UK-based institutions, or business interests in the UK, IHT planning is a live concern regardless of Gulf residency. The 2026 changes to APR and BPR reliefs are particularly relevant for those with UK farming land or privately held business assets. Spousal exemptions and gifting rules also affect planning. This is not tax advice. Consult a qualified cross-border tax adviser with experience in both UK IHT law and the residency rules of your GCC country of residence before making any decisions.