What Are UK Situs Assets? What Every Long-Term Expat Needs to Know
TL;DR
Even if you live abroad, certain UK-based assets — known as UK situs assets — can still fall within the scope of UK inheritance tax. This commonly includes UK property, shares in UK companies, and some UK investments, regardless of your residency. Many expats assume leaving the UK removes exposure, but situs rules focus on where the asset is located, not where you live. Understanding which assets remain within UK tax scope is essential for effective estate planning.
Concerned About UK Inheritance Tax Exposure?
Discovering that you own UK situs assets is often the moment many British expats realise that living abroad does not necessarily remove them from the scope of UK Inheritance Tax. While understanding which assets may remain subject to UK tax is important, it is only the first step in a much broader planning process.
Inheritance Tax exposure can be influenced by a range of factors including the type of assets you own, where they are located, your long-term residency position, family circumstances and how your estate is structured. What appears straightforward on the surface can quickly become more complex when multiple countries and tax systems are involved.
Effective estate planning is about more than reducing tax. It is also about ensuring your wealth passes to the people you care about in the way you intend, while minimising administrative complications and uncertainty for your family.
Decisions involving UK property, investment portfolios, pensions, beneficiary arrangements and international assets can all have a bearing on your overall estate planning strategy. Reviewing these issues early often provides more flexibility and more planning opportunities than waiting until later in life.
Every family’s circumstances are different. What works well for one expat household may not be appropriate for another, which is why personalised advice can be particularly valuable when dealing with cross-border inheritance planning.
Book a discovery call with Ross to discuss your personal circumstances, understand any potential UK Inheritance Tax exposure and explore planning options designed to help protect your family’s future.
UK Situs Assets
If you’ve lived outside the UK for some time, you may have thought that UK inheritance tax (IHT) rules no longer apply to you — especially if you’ve built a new life, home, and financial base abroad.
However, if you still own UK situs assets, you may find that part of your wealth remains within HMRC’s reach.
Let’s unpack what that means and why it matters.
🔍 Key Takeaways From This Post
- UK situs assets are those legally located in the UK, such as property, shares, and UK-based investments.
- From April 2025, inheritance tax (IHT) will depend on residence, not domicile.
- After 10 years of UK residence, your worldwide assets could fall within the UK IHT net.
- FOTRA gilts (Free of Tax to Residents Abroad) remain exempt from UK IHT for non-residents.
- From April 2027, UK pensions are expected to become subject to inheritance tax.
- Expats with UK assets should review ownership structures, wills, and tax residence plans.
What Are UK Situs Assets?
The term “situs” simply means location — in legal terms, where an asset is considered to be situated for tax purposes.
A UK situs asset is anything legally treated as being located in the UK. Common examples include:
- UK property (residential or commercial)
- UK shares (e.g. BP, Tesco, Barclays)
- UK unit trusts or OEICs
- UK bank and building society accounts (in some cases)
- UK gilts (although some are exempt — more on this below)
- UK life insurance policies or bonds
It doesn’t matter where you live — if the asset itself is based in the UK, HMRC considers it UK situs.
| Rule | Before April 2025 | From April 2025 |
|---|---|---|
| Basis of IHT | Domicile | Residence |
| Scope of taxation | UK assets only for non-doms | Worldwide assets after 10 years’ residence |
| Exit from scope | Change of domicile | 10 years of non-residence in the previous 20 |
| Applies to | Primarily UK-domiciled individuals | Anyone meeting the residence criteria |
UK Situs Assets Are Only Part of the Estate Planning Picture
Understanding whether you own UK situs assets is an important step in assessing your potential exposure to UK Inheritance Tax, but it is only one part of a much wider estate planning conversation. Focusing solely on individual assets can sometimes lead people to overlook other factors that may have an equally significant impact on their family’s future.
For many British expats, the starting point is understanding how UK Inheritance Tax applies to their circumstances. However, inheritance tax exposure is rarely determined by a single asset alone. The interaction between your assets, family situation and long-term plans often plays a crucial role in shaping the outcome.
Questions around domicile and long-term residency can also be important. While these concepts can be complex, they may influence how your estate is treated and whether certain assets remain within the scope of UK Inheritance Tax. Understanding how these rules apply to your personal circumstances is often an essential part of effective planning.
Pension planning should not be overlooked either. Pensions frequently sit outside the estate for inheritance purposes and can play an important role in wider wealth preservation and succession planning strategies. Decisions made today may have implications for future generations.
Many expats also have cross-border estates, with assets spread across multiple countries. Property, bank accounts, investments and business interests located in different jurisdictions can create additional complexity and may require careful coordination to ensure everything works together effectively.
Beneficiary planning is another area that deserves attention. Ensuring that beneficiary nominations are up to date and aligned with your broader estate planning objectives can help reduce uncertainty and provide greater clarity for your family.
Ultimately, estate planning is about family wealth transfer. The objective is not simply to understand tax rules, but to ensure that assets pass to the intended beneficiaries in the most efficient and effective way possible while supporting the people who matter most to you.
Understanding your UK situs assets is important, but effective estate planning requires a broader view of your overall financial position.
When pensions, investments, property, beneficiary arrangements and inheritance planning are considered together, it becomes much easier to build a strategy designed to protect family wealth across generations and across borders.
Why It Matters from April 2025
Previously, UK inheritance tax (IHT) was based largely on domicile.
From 6 April 2025, that all changed.
The government moved to a residence-based system, where liability for inheritance tax depends on how long you’ve been UK resident.
In summary:
- After 10 years of UK residence (in the previous 20), your worldwide estate may become subject to UK IHT.
- After 10 years of UK non-residence (in the previous 20), only your UK situs assets will be subject to UK IHT.
So even if you’ve lived abroad for years, UK situs assets remain within HMRC’s reach — and if you ever return to the UK, more of your wealth could be exposed.
How UK Situs Assets Are Taxed for Non-Residents
Under the new system, UK situs assets will remain UK taxable property for inheritance tax purposes regardless of where you live and how long you have lived outside the UK.
For example:
- A British expat in Spain who owns a UK buy-to-let property would still have that property assessed for IHT on death.
- If you hold shares in UK-listed companies directly, those shares are still within the UK IHT net.
But there’s an important exception worth knowing about — certain UK gilts known as FOTRA.
A Special Case: UK Gilts That Are FOTRA
FOTRA stands for Free of Tax to Residents Abroad.
These are UK government bonds specifically designed to be exempt from UK income tax and inheritance tax when held by non-UK residents.
That means if you’re living overseas and want to hold UK government debt for security or income, FOTRA gilts can give you:
- Sterling exposure
- Government-backed security
- No UK IHT liability
Not all gilts are FOTRA, but most modern issues are.
It’s one of the few ways long-term expats can retain exposure to the UK without dragging their estate into the UK tax net.
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Unsure Whether Your Estate Could Be Exposed to UK Inheritance Tax?
Many British expats assume that moving abroad automatically removes them from the scope of UK Inheritance Tax. In reality, the position is often more complex and depends on a range of factors including asset ownership, residency history, family circumstances and the structure of the estate itself.
Every family situation is different. Some people hold UK property, others have investment portfolios, pension arrangements or business interests spread across multiple countries. As a result, inheritance tax exposure can vary significantly from one household to another.
Asset ownership structures matter. How assets are held, who owns them and how they are intended to pass to future generations can all influence the eventual outcome. Small differences in structure can sometimes have significant long-term implications.
International estates can become surprisingly complex. Different countries may have different succession rules, inheritance taxes and reporting requirements. Coordinating assets across multiple jurisdictions often requires a broader perspective than simply looking at one asset or one country in isolation.
One of the advantages of addressing these issues early is that planning often creates more options. Reviewing your arrangements before problems arise can help identify opportunities, avoid unnecessary complications and provide greater clarity for your family.
Understanding your exposure today can make it easier to make informed decisions about your estate, your beneficiaries and the long-term protection of family wealth.
Non-UK Spouses and the IHT Spouse Exemption
For inheritance tax, one of the most valuable exemptions available is the spouse or civil partnership exemption.
Provided both spouses’ long-term residence status (previously domicile status) is the same, the amount of the spouse exemption is generally unlimited. The unlimited exemption also applies to lifetime gifting between spouses.
However, in cases where the deceased is considered a long-term resident in the UK but their spouse is not, the amount of spouse or civil partnership exemption is limited to £325,000.
This capped exemption is unusual because it is a lifetime limit. It does not refresh after seven years (as with the general nil-rate band), and any gifting to a non-UK resident spouse during the deceased’s lifetime will use up part or all of this exemption.
To reiterate, this additional spouse allowance is in addition to the general nil-rate band of £325,000.
Making an Election to Be Treated as a Long-Term Resident for Inheritance Tax Purposes
In circumstances such as these, one option to consider is for the non-long-term resident spouse to make an election to be treated as long-term resident for inheritance tax purposes.
This election aligns the long-term residence position between the two spouses, allowing the estate to benefit from the unlimited spouse exemption.
However, this comes with a significant trade-off: the electing spouse’s own worldwide estate will then fall within the scope of UK inheritance tax for 10 years (and potentially longer).
This is a critical point for mixed-nationality couples and long-term expats married to non-UK citizens.
Looking Ahead: Pension IHT Changes in April 2027
Another change on the horizon is the proposed inheritance tax treatment of UK pensions, starting from April 2027.
Under current rules, UK pensions can be passed on free of IHT.
However, from 2027, your pension fund could become part of your taxable estate.
For expats who still hold UK pensions, this represents a major shift.
In short: pensions may soon lose their “outside of estate” status, potentially exposing more family wealth to IHT.
🔗 Are UK Pensions Now Liable for Inheritance Tax? The New Pension IHT Rules Unpacked
Case Study: Jim’s Cross-Border Challenge
Background
Jim, aged 67, is a British citizen who retired to the Philippines five years ago after a 15-year international career with BP. He has a Filipino wife, aged 54, and a son, aged 39, from his first marriage who lives in the UK.
Jim’s Assets
- A UK property worth £270,000 (rented out)
- BP shares worth £200,000
- A Legal & General defined contribution pension worth £320,000
Even though Jim is long-term non-resident, both his UK property and UK shares are classed as UK situs assets and remain within the scope of UK inheritance tax (IHT).
His pension is currently outside the IHT net, but from April 2027, that is set to change.
If Jim were to die before 2027, his UK property and shares could face up to 40% IHT.
Planning Options
Jim’s options include:
- Selling the UK property
- Considering an offshore bond or global investment platform for his shares
- Drawing down his pension commencement lump sum and/or creating a strategy for phased pension withdrawals
The Outcome
Without proper planning, Jim’s heirs could lose over £200,000 in unnecessary tax. With cross-border advice and restructuring, he can protect more of his estate and ensure his assets are distributed tax-efficiently across both the UK and the Philippines.
What Can Long-Term Expats Do?
Here are some practical next steps to consider:
💡 Identify your UK situs assets — List everything you own that’s legally UK-based: property, shares, pensions, and investments.
💡 Review ownership and structure — Could some of your UK holdings be restructured or diversified through offshore solutions?
💡 Consider timing and residence — Your tax exposure depends heavily on how long you’ve lived in or outside the UK.
💡 Update your wills — Cross-border estates can be complex — ensure your wills are valid in all relevant jurisdictions.
💡 Get expert advice — International estate and tax planning needs to be tailored to your family and country of residence.
📣 Take Control of Your Cross-Border Estate Planning
If you’re a long-term expat with UK assets, now is the time to review your inheritance tax exposure.
I specialise in helping British expats and mixed-nationality couples structure their wealth tax-efficiently across borders.
Common Mistakes Expats Make With UK Situs Assets
UK situs assets can create unexpected Inheritance Tax exposure for British expats, particularly when assumptions are made based on residency rather than a full understanding of how the rules operate. While the concept may appear technical, many costly mistakes stem from a handful of common misunderstandings.
Assuming living abroad removes UK Inheritance Tax exposure
One of the most common misconceptions is that leaving the UK automatically removes all exposure to UK Inheritance Tax. In reality, certain UK-based assets may remain within the scope of UK tax rules regardless of where you live. This can come as a surprise to many expats who believed their move overseas had completely severed their connection to the UK tax system.
Forgetting about UK-based investments
Many people focus on property when thinking about UK assets but overlook investments such as shares, investment portfolios, gilts and certain savings arrangements. Depending on the circumstances, these assets may still be relevant when assessing inheritance tax exposure and wider estate planning considerations.
Overlooking UK property ownership
Property is often one of the largest assets held by British expats. Whether it is a former family home, a buy-to-let property or a holiday home, UK property can have important inheritance tax implications that should be reviewed as part of a wider estate planning strategy.
Ignoring beneficiary planning
Estate planning is not only about understanding which assets may be taxable. It is also about ensuring assets pass to the right people in the most effective way possible. Outdated beneficiary nominations, poorly coordinated estate arrangements or assumptions about how assets will be distributed can all create avoidable complications.
Delaying estate planning reviews
Many people postpone estate planning because they assume it can be addressed later. However, family circumstances, tax legislation and personal wealth often change over time. Regular reviews help ensure your plans remain aligned with your objectives and reflect any changes in your situation.
The challenge with UK situs assets is that problems often remain hidden until a significant life event occurs or an estate is being administered. By that stage, opportunities that were previously available may no longer exist.
Understanding your exposure today may help prevent significant tax complications for your family in the future.
Taking a proactive approach to estate planning can provide greater clarity, reduce uncertainty and help ensure your wealth is passed on in accordance with your wishes while supporting the long-term financial security of future generations.
Real People, Real Results
“Taxation, pensions, inheritance, capital gains and investing are areas that need qualified and expert advice. I would certainly be lost without him. If you are an expat looking for sound financial advice, then you would do well to reach out to Ross.”
— Malcolm Ridge
❓ Frequently Asked Questions (FAQs)
1. What does “UK situs asset” mean?
It means any asset legally situated in the UK for tax purposes, including property, shares, and UK-based investments.
2. Do UK situs assets attract UK inheritance tax for non-residents?
Yes. UK situs assets are always within the UK inheritance tax net, regardless of where you live.
3. What are FOTRA gilts?
FOTRA (Free of Tax to Residents Abroad) gilts are UK government bonds exempt from both income tax and inheritance tax for non-residents.
4. Are UK pensions considered UK situs assets?
Pensions aren’t typically classed as UK situs assets, but from April 2027, pension death benefits are set to become subject to inheritance tax.
5. What happens if I move back to the UK after living abroad for many years?
If you become UK-resident again after being abroad, you’ll start building up “years of residence” for inheritance tax purposes. Once you’ve been UK-resident for 10 tax years (in the previous 20), your worldwide assets could be brought back into the UK inheritance tax net. You’ll need to remain non-resident for 10 years to fall fully outside the scope again.
6. How can I reduce my UK inheritance tax exposure as a long-term expat?
You can’t eliminate it entirely if you still hold UK situs assets, but you can reduce exposure by:
- Restructuring UK holdings into non-UK domiciled funds,
- Diversifying investments through offshore platforms,
- Using trusts or life insurance to protect beneficiaries, and
- Planning ahead before returning to the UK or acquiring new UK assets.
7. How can I remove UK situs assets from my estate?
You may be able to sell or restructure them into non-UK domiciled funds or wrappers. Always seek professional advice first.
8. How does the new residence-based inheritance tax system affect mixed-nationality couples?
If one spouse is long-term UK-resident and the other is not, the unlimited spouse exemption may no longer apply in full. The exemption is limited to £325,000, unless the non-UK spouse elects to be treated as UK-resident for inheritance tax purposes, which would then expose their own worldwide estate to UK IHT for 10 years.
9. Are UK bank accounts UK situs assets?
Yes, if held with a UK bank. However, “foreign currency” accounts with UK banks can sometimes be treated differently.
10. What’s the IHT threshold for UK situs assets?
The current nil-rate band is £325,000, plus any residence nil-rate band (if applicable). Assets above this may face 40% IHT.
📚 Further Reading
🔗 Lifetime gifts and Inheritance Tax: How to notify HMRC
🔗 UK Inheritance Tax Rules For Expats: Understanding the Implications for Non-Domiciled Spouses
🔗 Inheritance Tax Planning For Expats: Using The PASTOR Framework to Effectively Manage Your Estate
🔗 Using gift allowances to reduce IHT: Six tips on using gifts to reduce inheritance tax
🔗 How does UK inheritance tax work when a spouse is non-domiciled?
🧠 Final Thoughts
The UK’s move to a residence-based system marks a fundamental change in how expats are taxed.
If you still hold UK property, shares, or pensions, now is the time to review, restructure, and plan.
A little foresight today could save your family hundreds of thousands in inheritance tax tomorrow.
Talk to an Expert
Many expats only discover the importance of UK situs assets when they begin reviewing their estate or after a significant life event. By that stage, questions around Inheritance Tax, family wealth transfer and cross-border estate planning can become considerably more complex.
I’m Ross Naylor, a UK-qualified Chartered Financial Planner and Pension Transfer Specialist with nearly 30 years' experience helping British expats worldwide understand their inheritance tax exposure and develop long-term strategies designed to protect family wealth.
While understanding UK situs assets is important, effective estate planning extends far beyond identifying individual assets. Decisions involving UK property, investments, pensions, beneficiary arrangements, domicile considerations and international estates can all influence how wealth passes to future generations.
I firmly believe your location in the world should never be a barrier to expert, impartial and transparent financial advice you can trust.
Whether you're concerned about UK Inheritance Tax exposure, cross-border estate planning, family wealth preservation, pension succession planning or understanding how your assets may be treated under the latest rules, I can help you build a clear and practical strategy designed around your family's objectives.
Good estate planning is not simply about reducing tax. It is about ensuring your wealth reaches the people you care about in the most effective way possible while reducing uncertainty and unnecessary complications for future generations.
Book a Discovery Call