Many people could be liable for an unexpected Inheritance Tax bill following Rachel Reeves’ changes to the exemption rules from 2027 onwards. However, there are still a few key loopholes and escapes that could allow people to lessen the burden on future generations.
One particular option that’s growing in popularity is a move abroad to escape the 40% tax bill. Some of the changes made in Labour’s first budget to domicile statuses and rules means Britons who retire abroad and die in a foreign country won’t have to pay UK Inheritance Tax on their foreign assets if they’ve lived outside of the UK for at least 10 years.
This is because the domicile and non-dom tax regime is being replaced with a residency status system. The changes around British domicile will shift in April 2025, with Brits abroad currently still liable for Inheritance Tax on their worldwide wealth.
Many Brits currently living abroad could be able to make full use of this loophole as soon as the domicile change comes into effect. It is also important to note that you may skip out on British death taxes but your move abroad may make you liable for Inheritance Tax dues in your country of choice.
A limited number of countries have no Inheritance Tax or very specific circumstances where it is paid such as India, Qatar, Singapore, New Zealand, Malta and Norway. Experts have also voiced their concerns that this shift paired with the private school fee increases could see a mass exodus of Britain’s wealthy.
Maxwell Marlow, of the Adam Smith Institute, warned GB News: “The abolition of the non-dom regime will drive away highly mobile wealth creators and so their tax contribution will decrease and they will invest less in our economy.” The Office for Budget Responsibility has somewhat catered for this, predicting 12% of non-doms will leave the country due to the changes.
This figure sat at 10% when the Reeves’ Conservative predecessor Jeremy Hunt announced his plan. An HM Treasury spokesperson defended the changes, telling the outlet: “Replacing the outdated non-dom tax regime with a new internationally competitive new residence-based system addresses unfairness in our tax system, attracts the best talent and investment to the UK.”
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