UK Inheritance Tax for Expats: Do You Still Pay After Leaving the UK?

Many of the British expats I meet in Ho Chi Minh City assume that once they have sold the car, packed the boxes and boarded a flight to Vietnam, UK inheritance tax is no longer their concern. Unfortunately, that is rarely true straight away. UK inheritance tax for expats now depends on how many years you have lived in the UK rather than where you feel you belong, and for many people the UK keeps a claim over their worldwide estate for up to ten years after they leave.

Since 6 April 2025, the old concept of domicile has been replaced by a residence-based test. As a result, some long-standing expats have quietly escaped UK inheritance tax on their overseas wealth, while others who moved abroad more recently are still firmly inside the net. In this guide, I explain how the long-term residence rules work, how to calculate your own "IHT tail", which assets stay taxable no matter where you live, and how Vietnam's own rules sit alongside the UK system. Along the way, I use worked examples so you can see exactly how the rules apply to real situations.

Key Takeaways

• Since 6 April 2025, UK inheritance tax (IHT) on your worldwide assets depends on whether you are a long-term UK resident, meaning you were UK tax resident for at least 10 of the previous 20 tax years. Domicile no longer decides this.
• After you leave the UK, your worldwide estate usually stays within UK IHT for between 3 and 10 tax years. This is known as the IHT tail, and its length depends on how long you lived in the UK.
• UK assets, such as UK property and UK bank accounts, remain subject to UK inheritance tax however long you have lived abroad.
• The nil rate band (£325,000) and residence nil rate band (£175,000) are frozen until 5 April 2031, and most unused pension funds are due to fall within IHT from 6 April 2027.
• Vietnam has no separate inheritance tax, but heirs can pay 10% personal income tax on inherited assets above VND 20 million, and there is no UK-Vietnam treaty to stop the same wealth being taxed in both countries.

Do Expats Pay UK Inheritance Tax? The Short Answer

Yes, many expats still pay UK inheritance tax, but whether you will depends on three things: your UK residence history, where your assets are located, and when you die relative to the date you left. Broadly, the rules now sort people into two groups:

• Long-term UK residents (including those still within their IHT tail): UK inheritance tax can apply to everything you own worldwide, including your Vietnamese bank accounts, overseas property and offshore investments.
• Non-long-term residents: UK inheritance tax applies only to your UK assets, such as a house in Bristol or savings held with a UK bank.

In my experience, the expats most likely to be caught out are those who spent most of their working lives in the UK and moved to Vietnam within the last few years. On paper they live in Ho Chi Minh City, Hanoi or Da Nang, yet for UK inheritance tax purposes they may still be treated much like someone living in Manchester.

What Is UK Inheritance Tax? A Quick Refresher

Before looking at how the expat rules work, it helps to understand the basic mechanics. UK inheritance tax is a tax on the value of your estate when you die, plus certain gifts you made in the seven years before death. Your executors normally pay it from the estate before your beneficiaries receive anything.

UK Inheritance Tax Rates and Thresholds for 2026/27

Importantly, any unused allowances can pass to a surviving spouse or civil partner. This means a married couple can potentially leave up to £1 million before any UK inheritance tax is due, provided the residence nil rate band conditions are met. Because the thresholds have been frozen for so long, however, rising asset values are pulling more estates above them every year.

When UK Inheritance Tax Is Due

Executors must normally pay any UK inheritance tax by the end of the sixth month after the month of death, and interest is charged after that. Even if you are not a long-term UK resident, your executors will usually need to deal with HMRC and obtain a UK grant of probate before UK assets, such as a UK bank account or property, can be released to your family.

How UK Inheritance Tax for Expats Changed in April 2025

Out With Domicile, In With Residence

Until April 2025, UK inheritance tax depended on your domicile, a legal concept based on where you regard as your permanent home. For British expats this was a real problem, because a UK "domicile of origin" is notoriously sticky. Many people who had lived abroad for decades were still treated as UK domiciled simply because they could not prove they never intended to return.

From 6 April 2025, domicile was replaced by a much more mechanical test based on long-term UK residence. Instead of asking where you consider home, HMRC now asks a simple question: in how many of the last 20 tax years were you UK tax resident?

The 10 Out of 20 Years Test Explained

You are a long-term UK resident for a tax year if you were UK tax resident in at least 10 of the previous 20 tax years. To apply the test correctly, keep the following points in mind:

• Tax years run from 6 April to 5 April, not calendar years.
• Your residence in each year is decided by the Statutory Residence Test, which looks at factors such as the days you spend in the UK, your UK home and your UK work.
• The years do not need to be consecutive. Five years in the UK in your twenties and five more in your forties can still add up to ten.
• A split year counts as a full year of UK residence. The tax year in which you leave the UK usually counts against you.
• Different rules apply to under-20s, who are long-term residents if they were UK resident for at least half of the tax years since birth.

What This Means for European Expats Who Lived in the UK

Because the test is based on residence rather than nationality, it applies equally to European expats. For instance, a French or German professional who worked in London for 12 years before moving to Vietnam is treated exactly like a British national with the same residence history. Many European clients I speak with are surprised to learn that their years in the UK can still expose their worldwide estate to UK inheritance tax, even though they never considered the UK their permanent home.

What Is the IHT Tail and How Long Does It Last?

Once you qualify as a long-term UK resident, you do not lose that status the moment you leave. Instead, you remain within UK inheritance tax on your worldwide assets for a set number of tax years after you become non-resident. This period is commonly called the IHT tail, and its length depends on how many of the 20 tax years before your departure you were UK resident.

In other words, the minimum tail is three years and it grows by one year for each additional year of UK residence, up to a maximum of ten. Someone who lived in the UK their whole life, which describes most British retirees moving to Vietnam, will therefore face the full ten-year tail.

When Does the IHT Tail Start?

The tail is measured in complete tax years of non-residence. Since the year you leave is usually a split year, and split years count as years of UK residence, the clock normally starts from the first full tax year after your departure.

For example, if you leave the UK in August 2026, the 2026/27 tax year will usually count as a UK resident year. Your first full non-resident year is then 2027/28, and that is when your tail begins to run.

What Happens After You Have Been Abroad Long Enough?

Once you have spent enough consecutive tax years outside the UK to see out your tail, you stop being a long-term UK resident. From that point onwards, only your UK assets remain within UK inheritance tax. Furthermore, after ten consecutive years of non-residence the slate is effectively wiped clean, so if you later moved back to the UK you would need to build up ten years of residence again before your worldwide estate came back into scope.

What If You Return to the UK Before Your Tail Ends?

By contrast, returning to the UK before your tail ends can be costly. Your earlier UK years are still sitting within the 20-year look-back window, so you may be treated as a long-term UK resident again almost immediately. This is worth thinking about carefully if you are considering moving back to be closer to family or for healthcare.

Real-Life Examples: How the Long-Term Residence Rules Work

Rules like these are much easier to understand with real numbers, so let us look at three typical expats. The names are illustrative, but the situations are ones I come across regularly.

Example 1: James, a Recent Retiree in Ho Chi Minh City

James lived in the UK all his life and moved to Thao Dien in August 2022 after retiring. The 2022/23 tax year was a split year, so it counts as a UK resident year, and his first full non-resident year was 2023/24. Because he was UK resident in all 20 of the tax years before he left, he faces the maximum ten-year tail. As a result, he remains a long-term UK resident until 5 April 2033.

James is divorced, has two adult children and owns the following:

• His former family home in Surrey, now let out, worth £450,000
• An offshore investment portfolio worth £400,000
• Vietnamese bank accounts and other assets worth £100,000

If James died this year, his whole £950,000 estate would fall within UK inheritance tax. After deducting his nil rate band of £325,000 and a residence nil rate band of £175,000 (because the Surrey house was once his home and passes to his children), £450,000 would be taxed at 40%, producing a bill of £180,000. Had he already been outside his tail, only the Surrey house would be in scope and, after his allowances, no UK inheritance tax would be due at all.

Example 2: Sophie, a German Professional Moving to Hanoi

Sophie, a German national, moved to London in 2014 and was UK resident from the 2014/15 tax year onwards. She relocates to Hanoi in June 2026, so 2026/27 is a split year and counts as UK resident, giving her 13 years of UK residence in total. Therefore, her tail is the minimum three years. She stays a long-term UK resident through 2027/28, 2028/29 and 2029/30, and from 6 April 2030 only her UK assets remain exposed.

Example 3: Peter, a Long-Standing Expat in Da Nang

Peter left the UK in 2012 to teach in Asia and has lived in Da Nang for several years. He has now been non-resident for well over ten consecutive tax years, so he is not a long-term UK resident. Under the old domicile rules, he might still have been treated as UK domiciled, with his entire estate exposed. Under the new rules, however, only his UK assets count.

Peter owns a buy-to-let flat in Manchester that he has never lived in, worth £300,000, plus £60,000 in a UK bank account. His UK estate is therefore £360,000. After his £325,000 nil rate band, £35,000 is taxable at 40%, giving a bill of £14,000. Because the flat was never his home, the residence nil rate band does not help him.

The Three Examples Side by Side

Which Assets Are Always Exposed to UK Inheritance Tax?

Even after your tail has ended, UK inheritance tax continues to apply to assets that are located in the UK. This is the point many expats overlook, particularly those who keep a UK property as a pension supplement or a base for visits.

UK Assets That Stay Within UK Inheritance Tax

• UK land and property, including rental properties and holiday homes
• UK residential property held through an overseas company or partnership, which is looked through for inheritance tax purposes
• UK bank and building society accounts
• Shares in UK-incorporated companies
• Personal belongings kept in the UK, such as cars, art and furniture

Assets Outside UK Inheritance Tax Once You Are Not a Long-Term Resident

• Bank accounts, property and investments held outside the UK, including in Vietnam
• Holdings in UK authorised unit trusts and open-ended investment companies (OEICs)

Because UK assets remain exposed indefinitely, it is worth reviewing how and where you hold them. Our guide on how to manage UK assets while living abroad explains the practical side of keeping UK property, savings and investments as an expat.

What About Your UK Pension?

At present, most unused pension funds sit outside your estate for inheritance tax. However, from 6 April 2027, most unused pension funds and pension death benefits are due to be included when working out UK inheritance tax. For many UK expats, a pension is one of their largest assets, so this change could push estates that were previously comfortably below the thresholds into IHT territory. If your pension forms a large part of your wealth, reviewing your plan before April 2027 should be a priority.

How Vietnam Treats Inheritances, and Why Double Tax Is a Real Risk

So far we have focused on the UK. Yet if you live in Vietnam, your family also needs to consider Vietnamese tax, and the two systems do not fit together neatly.

Vietnam Has No Inheritance Tax, But It Does Tax Heirs

Vietnam does not levy an estate or inheritance tax in the way the UK does. Instead, it treats inheritances and gifts as taxable income for the person who receives them. Under the new Personal Income Tax Law (Law No. 109/2025/QH15), which took effect on 1 July 2026, inheritances and gifts are taxed at 10% on the value above VND 20 million each time they are received, up from the previous VND 10 million threshold.

This applies mainly to assets such as real estate, securities, capital contributions in businesses and assets that must be registered, such as cars. Certain transfers of real estate between close family members, such as between spouses or between parents and children, are exempt. For a fuller picture of how Vietnamese tax works for foreigners, see our guide to personal income tax in Vietnam.

There Is No UK-Vietnam Inheritance Tax Treaty

The UK and Vietnam do have a double taxation agreement, but it only covers taxes on income and capital gains. The UK has separate inheritance tax treaties with only a handful of countries, namely France, India, Ireland, Italy, the Netherlands, Pakistan, South Africa, Sweden, Switzerland and the United States. Vietnam is not one of them.

As a result, there is no treaty to decide which country has the first right to tax an inheritance. UK unilateral relief can sometimes reduce the UK bill where overseas tax is charged on the same property, but it is designed around overseas inheritance and estate taxes and may not neatly cover Vietnamese income tax paid by your heirs. This is exactly why cross border estate planning matters so much for expats with ties to both countries.

A Simple Illustration

Suppose James, from our first example, also holds Vietnamese listed shares worth VND 2 billion and leaves them to his adult son, who lives in Vietnam. While James is within his tail, those shares are part of his worldwide estate for UK inheritance tax. Separately, his son could owe Vietnamese personal income tax of 10% on the value above VND 20 million, roughly VND 198 million. Without careful planning, the same shares could effectively be taxed twice.

How to Work Out Your Own UK Inheritance Tax Position: A Step-by-Step Guide

Now that you understand the rules, you can estimate your own position. You do not need to be a tax specialist to do this, but you do need to be methodical, as each step builds on the one before it.

Step 1: List Your UK Tax Residence for the Last 20 Tax Years

Start by writing down each tax year (6 April to 5 April) for the last 20 years and marking whether you were UK resident. Old P60s, tax returns, employment records and passport stamps can all help. If you are unsure about a particular year, the Statutory Residence Test will decide it, and this is where professional help is often worthwhile.

Step 2: Identify the Year You Left and Your First Full Non-Resident Year

Next, using the list from Step 1, pinpoint the tax year in which you left the UK. If it was a split year, remember that it still counts as a UK resident year. The following tax year is usually your first full non-resident year, and this is the point from which your tail is measured.

Step 3: Apply the Tail Table

Once you know how many of the 20 tax years before your departure you were UK resident, use the tail table earlier in this guide to see how many full non-resident tax years you need. Count forward from your first full non-resident year to find the date your worldwide estate drops out of UK inheritance tax.

Step 4: Split Your Assets Into UK and Non-UK

With your timeline established, list everything you own and sort it into two columns: UK assets and non-UK assets. Remember that UK assets stay exposed permanently, whereas non-UK assets are only exposed while you are a long-term UK resident.

Step 5: Value Your Estate and Apply the Allowances

Then add up the assets that are currently in scope, deduct any debts, and apply your nil rate band and, if relevant, the residence nil rate band. Remember to include any transferable allowances from a late spouse, as well as gifts you made in the last seven years.

Step 6: Check the Vietnamese Side

After that, consider which assets your beneficiaries will receive in Vietnam, or which Vietnamese assets you will pass on, and estimate any Vietnamese personal income tax. This is particularly relevant if your children or spouse live in Vietnam.

Step 7: Review Your Will and Wider Plan

Finally, make sure your will reflects what you have learnt. Many expats have a UK will written years ago that does not account for Vietnamese assets or the new residence rules. Our guide to writing a will as a UK expat explains when separate UK and Vietnamese wills make sense.

Common Mistakes Expats Make With UK Inheritance Tax

Over the years, I have seen the same misunderstandings come up time and again. Avoiding them can save your family a significant amount of money and stress.

• Relying on a "domicile of choice" in Vietnam. Since April 2025, domicile no longer decides your exposure. Counting your tax years is what matters now.
• Assuming that selling a UK home ends all exposure. If you are still within your tail, your overseas assets remain exposed, regardless of whether you own UK property.
• Forgetting the split year. The year you leave usually counts as a UK resident year, which can extend your tail by a year.
• Spending long periods back in the UK. Extended visits can make you UK resident again under the Statutory Residence Test and undo years of progress.
• Leaving everything to a non-UK resident spouse without checking the limits. The spouse exemption can be capped, as explained below.
• Leaving the problem until later. The tail is a known period, so the cost of dying within it can be planned for rather than left to chance.

Practical Ways to Reduce Your UK Inheritance Tax Exposure

Fortunately, there are several legitimate ways to manage UK inheritance tax while you are abroad. The right combination depends on your age, health, family and wealth, so treat the following as a starting point for a conversation rather than a recipe.

Use Your Annual Gift Exemptions

Certain gifts are immediately free of UK inheritance tax, however long you live afterwards:

• Annual exemption: £3,000 per tax year, with one year's unused allowance able to be carried forward
• Small gifts: up to £250 per person per tax year, to anyone who has not received your annual exemption
• Wedding gifts: up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else
• Gifts from surplus income: regular gifts made from income, not capital, that do not reduce your standard of living

Understand the Seven-Year Rule and Taper Relief

Larger gifts to individuals generally become free of UK inheritance tax if you survive seven years after making them. If you die sooner and your gifts exceed the nil rate band, taper relief reduces the tax charged on the excess:

Time Gifts of Non-UK Assets With Care

Here is a point that is often missed. Once you are no longer a long-term UK resident, outright gifts of non-UK assets fall outside UK inheritance tax altogether, even if you die within seven years, provided you do not keep a benefit from the gifted asset. Consequently, for some expats it can make sense to time significant gifts of overseas assets around the end of their tail.

Check the Spouse Exemption Before Relying on It

Normally, anything you leave to your spouse or civil partner is free of UK inheritance tax. However, if you are a long-term UK resident and your spouse is not, which is common in marriages between British and Vietnamese partners, the exemption is capped at £325,000 on top of your own nil rate band. Your spouse can elect to be treated as a long-term UK resident to unlock the full exemption, but doing so brings their own worldwide assets into UK inheritance tax, so the decision needs careful thought.

Consider Life Cover Written in Trust for Your Tail Years

Because the tail has a known end date, some expats take out life insurance for that period, written in trust so the payout sits outside their estate. The policy is designed to pay the expected IHT bill if they die within the tail, so their family receives the estate intact.

Review Trusts, Offshore Bonds and Your Overall Structure

Trusts, offshore bonds and other structures can play a role, but the rules changed significantly in April 2025, especially for trusts, so older arrangements should be reviewed rather than assumed to still work. Our guide to what are offshore bonds explains how they are taxed, and our effective estate planning for expats guide outlines the wider steps involved in protecting your wealth across borders.

How Benjamin Sharvell IFA Helps UK Expats With Inheritance Tax Planning

At Benjamin Sharvell IFA, I work with UK and European expats living in Ho Chi Minh City, Hanoi, Da Nang and across Vietnam, as well as those preparing to move here. Being based in Vietnam means I understand both how the UK rules follow you abroad and how Vietnamese regulations affect your family on the ground.

When it comes to inheritance tax, my support typically includes:

• Mapping your UK residence history and calculating when your IHT tail is likely to end
• Reviewing your UK and non-UK assets to identify what is exposed now and what will remain exposed
• Building a gifting and protection strategy that fits your income needs, including life cover for your tail years where appropriate
• Coordinating your plan across borders, including working alongside lawyers and tax specialists in the UK and Vietnam where needed
• Reviewing your plan regularly, so it keeps pace with rule changes such as the 2027 pension reforms

Inheritance tax is only one part of passing on wealth well. If you would like to understand the bigger picture, my guide to succession planning for expats explains how to structure your affairs so your family is looked after. If you are still deciding who to trust with your finances, my article on choosing a financial advisor for UK expats sets out what to look for.

Taking Control of UK Inheritance Tax as an Expat

Moving to Vietnam does not end your relationship with UK inheritance tax overnight. Under the long-term residence rules, your worldwide estate is likely to remain exposed for between three and ten tax years after you leave, and your UK assets stay exposed for as long as you own them. On top of that, Vietnam taxes heirs on what they receive, and there is no treaty to stop the two systems overlapping.

The good news is that, unlike domicile, the new rules are predictable. Once you know your residence history, you can work out your tail, value what is exposed and put a plan in place for the years that matter most. Many long-standing expats are also in a far better position than they were before April 2025.

If you would like a clear picture of your own UK inheritance tax position and a plan to protect your family, contact me today to arrange a consultation. I will help you understand where you stand and what you can do next.

This article is for general information only and does not constitute financial, tax or legal advice. Tax rules can change and their application depends on your individual circumstances, so please seek personalised advice before acting.

Frequently Asked Questions About UK Inheritance Tax for Expats

1. Do I pay UK inheritance tax if I live in Vietnam?

Possibly. If you were UK resident for at least 10 of the 20 tax years before you left, your worldwide estate usually remains subject to UK inheritance tax for 3 to 10 tax years after you leave. Once that period ends, only your UK assets remain exposed.

2. How long does the IHT tail last after leaving the UK?

It lasts between 3 and 10 full tax years of non-residence. If you were UK resident for 10 to 13 of the previous 20 tax years, the tail is 3 years, and it rises by one year for each extra year of residence, reaching 10 years for someone resident for all 20 years.

3. Does UK inheritance tax apply to property I own in Vietnam?

Only while you are a long-term UK resident, which includes your tail period. After that, property and other assets located outside the UK fall outside UK inheritance tax, although Vietnamese personal income tax may apply to whoever inherits them.

4. Is domicile still relevant for UK inheritance tax?

For deaths and gifts from 6 April 2025 onwards, domicile has largely been replaced by the long-term residence test. It can still matter for earlier events, certain transitional situations and some older trusts, so it has not disappeared completely.

5. Will my children pay tax in Vietnam if they inherit from me?

They may. Vietnam taxes inheritances as income for the recipient at 10% on the value above VND 20 million, although certain real estate transfers between close family members are exempt. Whether this applies depends on what they inherit and their own tax position in Vietnam.

6. Can short visits back to the UK affect my IHT tail?

Short visits are fine, but long or frequent stays can make you UK resident again under the Statutory Residence Test. If that happens, the year counts as a UK resident year, which can restart or extend your exposure, so it is wise to track your UK days carefully.