What Are UK Situs Assets? What Every Long-Term Expat Needs to Know
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 |
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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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.
❓ 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
🧠 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
Getting reliable expat financial advice shouldn’t feel complicated — or out of reach.
I’m Ross Naylor, a UK-qualified Chartered Financial Planner and Pension Transfer Specialist with nearly 30 years’ experience helping British expats manage complex cross-border investments, estate planning, and tax-efficient retirement strategies.
I firmly believe your location in the world should never be a barrier to expert, independent, and transparent financial advice you can trust.
If you’re planning to retire abroad, return to the UK after living overseas, or simply want to understand your cross-border options, I’ll help you cut through the noise and gain the clarity you deserve — with trusted expat financial advice tailored to your life.
