New UK inheritance tax rules drive wealthy to cycle between countries every decade

For most people, relocating abroad is a once-in-a-lifetime decision. However, a small group of wealthy Britons are increasingly considering moving countries roughly every decade as a strategy to avoid the UK’s inheritance tax (IHT).

This trend follows changes introduced by Chancellor Rachel Reeves in last year’s Budget, which altered the inheritance tax rules for expatriates, Caliber.Az reports via foreign media.

Under the new regime, Britons who spend at least 10 consecutive years living abroad are no longer liable for UK inheritance tax during that period. After this 10-year non-residency, they can return to the UK and live there for up to nine years before becoming subject to inheritance tax again.

This framework has led to some rather morbid calculations among the wealthy, as they consider how long they might live after returning to the UK. Catrin Harrison, a partner at law firm Charles Russell Speechlys, described such planning as “macabre,” noting that “people [are] working out ‘If I come back when I’m 90 I might have died within nine years’.”

Anthony Whatling, managing director at consultancy Alvarez & Marsal, suggested that facing the prospect of re-entering the inheritance tax net after nine years might prompt some individuals to move abroad again. “We anticipate many will proactively manage their residency status, potentially leaving again after nine years,” he said.

Stephen Kenny, partner at accountants PKF Littlejohn, called this “out-in-out” approach a “practical strategy in the right circumstance for the right clients.”

Among popular destinations for the wealthy seeking tax advantages, Milan has gained attention due to Italy’s €200,000 flat tax on unlimited foreign income brought onshore. Additionally, financial hubs in the United Arab Emirates have become attractive alternatives.

Christopher Groves, partner at law firm Withers, explained that as governments compete to offer tax-favorable residencies, many come with limited time frames. “Unless you want to go to Switzerland or Monaco, then you’re having to plan for a fixed number of years,” he said. Groves noted that such repeated moves would likely become more common.

Under the UK’s new foreign income and gains (FIG) regime, non-residents who have spent 10 years abroad enjoy a four-year exemption from UK tax on foreign income and gains upon returning. For comparison, Italy’s flat-tax scheme lasts 15 years, while Spain offers a six-year window.

Groves shared that some of his clients, including non-doms and UK-domiciled business owners, left Britain with a “10-year horizon,” often without firm plans to return. “They will likely look to move again, possibly back to the UK, but equally likely to the US or elsewhere,” he said.

Chancellor Reeves’s reforms replaced the former 15-year non-dom regime with a shorter system: new arrivals can benefit from the FIG rules for four years but must leave again after nine years to avoid inheritance tax.

Nimesh Shah, CEO of advisory firm Blick Rothenberg, observed that the FIG regime has encouraged some Britons who had lived overseas for over a decade to return temporarily. “Some returning Brits are planning to stay for a short period to take advantage of this regime and then leave within the four-to-10 year window” before inheritance tax liabilities resume, he said.

Despite these maneuvers, Groves cautioned that long-term planning is complicated by uncertainty: “There is a general feeling of mistrust of government . . . The chances of the current regime still being in place for 20 years are small.”

Stephen Kenny also warned against overemphasizing such tax planning strategies. “People shouldn’t let the tax tail wag the dog,” he said.

By Tamilla Hasanova