Latest figures show that 257,000 British nationals left the UK in 2024 and 143,000 living abroad returned (ONS, 18 November 2025).
On behalf of the growing tide of clients with international ties, advisers must now navigate two residence regimes when tax planning, according to specialist expat financial planners Blevins Franks.
The new concept of Long-Term Residence (LTR) replaced the long-standing domicile-based approach and sits alongside the well-established Statutory Residence Test (SRT).
While both tests assess a client’s connection to the UK, they serve distinct purposes and have different implications for income tax, capital gains tax and inheritance tax.
“While most UK tax reforms over recent years can have a negative impact on wealth, the introduction of Long-Term Residence stands out as a welcome move for many,” said David Morley, head of wealth structuring at Blevins Franks.
“Long-term non-UK residents and those returning to the UK could greatly benefit, provided they plan strategically.”
The Statutory Residence Test (SRT)
The UK Statutory Residence Test, introduced in 2013, determines whether a client is UK tax resident in a given tax year.
The SRT is structured around three key tests which you work through in order. If the client is non-UK resident under the first one, the other two do not apply:
Automatic Overseas Test – Clients are non-UK resident if they spend fewer than 16 days if previously resident over the last three years, or fewer than 46 days if they have been non-resident for longer, as well as if they work full-time abroad with limited UK presence.
Automatic UK Test – They are resident if they spend 183+ days in the UK, their only home is in the UK, or they work full-time in the UK.
Sufficient Ties Test – If neither of the above applies, this test considers their UK ties (family, accommodation, work, etc) and number of days spent in the UK.
“The SRT is applied annually and its outcome determines whether clients are taxed on their worldwide income and gains or only on UK-sourced income”, Morley said.
The new Long-Term Residence (LTR) rules
“From 6 April 2025, the UK replaced its long-standing domicile-based approach to inheritance tax with a residence-based system,” said Morley.
“Under the new rules, clients will be considered Long-Term Residents if they have been UK tax resident for at least ten of the previous 20 tax years. This status is determined using the Statutory Residence Test.”
- The key implications of Long-Term Residence status include:
Inheritance tax: Anyone classified as Long-Term Resident is liable to UK IHT on their worldwide assets, not just UK-sited ones. - Tail period: If they leave or have left the UK, they retain their LTR status – and remain within the scope of UK IHT – for up to ten UK tax years, depending on how long they were previously resident.
- Long-term non-UK residents: Once outside of their long-term residential period, any UK IHT liability is limited to assets in the UK – although some UK assets are treated as excluded property for IHT.
- No relevance of domicile: The concept of domicile is no longer relevant for tax purposes.
- Foreign income and gains (FIG): Anyone moving to the UK who is classified as a non-long-term resident can benefit from 100% tax relief on foreign income and gains for up to four tax years.
Why this matters
“If a client has left the UK, or plans to return or has recently moved back, or if they spend significant time in two or more countries, understanding both the SRT and LTR rules is essential for effective tax and estate planning,” said Morley.
Their tax residence is determined by the UK Statutory Residence Test where applicable, and the residency rules in the country of residence.
If they meet the residence criteria for both countries, the ‘tiebreaker’ rules outlined in the relevant double tax treaty determine where they pay their taxes that year.
When it comes to inheritance tax, long-term UK non-residents no longer need to worry about the uncertainty of the domicile regime.
After ten UK tax years of non-UK residence, assets outside the UK, along with UK excluded assets, do not fall within the scope of inheritance tax.
Non-UK residents should assess which, if any, UK assets they need to retain, especially if they intend to live abroad permanently.
From 2027, UK pension funds also form part of their estate for IHT, along with any other non-excluded UK assets. Once any exemptions and reliefs have been applied, anything over £325,000 per person is taxed at 40%.
If they return to the UK after ten UK tax years of non-residence, their non-UK assets will remain outside UK IHT for ten years.
When moving back to the UK, clients may also benefit from 100% tax relief exemption on foreign income and gains under the new Foreign Income and Gains regime. This FIG regime again provides opportunities to improve their tax position.
“While the Statutory Residence Test has always been relevant, the introduction of Long-Term Residence marks a new chapter for UK tax planning and presents opportunities for protecting clients’ family and heirs,” concluded Morley.
