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Deemed Domicile

Also known as: Statutory Domicile, IHT Deemed Domicile

Definition

Deemed domicile is a UK tax rule that treated long-term residents (15+ years historically, 10+ years from 2025) as UK domiciled for Inheritance Tax purposes, making worldwide assets taxable.

From 6 April 2025, deemed domicile was replaced by the "long-term resident" system, though the concept remains essential for understanding historical tax positions and the transition to current rules.

What Does Deemed Domicile Mean?

Deemed domicile is a statutory tax concept created under the Inheritance Tax Act 1984 (as amended by the Finance (No. 2) Act 2017) that treated certain individuals as UK domiciled for tax purposes, even when their actual domicile under common law was in another country. Unlike your real domicile—your permanent home determined by intention and residence—deemed domicile was a tax status automatically triggered by living in the UK for a specified period.

Under the rules that applied until 5 April 2025, you became deemed UK domiciled after being UK resident for 15 out of the previous 20 tax years. From 6 April 2025, the new "long-term resident" system reduces this threshold to just 10 out of 20 years. This distinction matters enormously for estate planning: it's the difference between paying Inheritance Tax only on UK assets versus paying it on your worldwide estate at 40% above the nil-rate band.

Marco, originally from Italy with Italian domicile of origin, moved to London in 2005 for work. By 2020, having been UK resident for 15 out of the previous 20 tax years, he became deemed UK domiciled for IHT purposes—even though he still intended to retire to Italy. His Italian property worth €400,000 and bank accounts of €200,000, previously outside UK IHT scope, became taxable under UK law. His estate's potential IHT liability increased from approximately £40,000 (UK assets only) to £175,000 (worldwide assets), a difference of £135,000.

The deemed domicile rules included "tail" provisions, meaning the status continued after leaving the UK. Under old rules, deemed domicile continued for three full tax years after departure. Under the new long-term resident rules from April 2025, the tail period varies from three to ten years depending on how long you were UK resident—those resident for 10-13 years have a three-year tail, increasing by one year for each additional year of residence up to a maximum of ten years for those resident 20+ years.

Common Questions

"How does deemed domicile affect my inheritance tax?" If you're deemed domiciled in the UK, you're liable for Inheritance Tax on your worldwide assets, not just UK-based property. This means all your assets—regardless of location—become subject to UK IHT at 40% above the nil-rate band. This is a significant change from non-domiciled status, where only UK assets are taxable.

"Does the 15-year deemed domicile rule still apply?" The 15-year deemed domicile rule applied until 5 April 2025. From 6 April 2025, it has been replaced by the long-term resident (LTR) system, which requires only 10 years of UK residence out of the previous 20 years to be subject to IHT on worldwide assets. The new system makes it easier to become liable for IHT on global assets.

"Can I avoid deemed domicile by leaving the UK?" Under the old rules (before April 2025), deemed domicile status continued for three full tax years after leaving the UK if you were resident for 15+ years. Under the new long-term resident rules from April 2025, the 'tail' period varies from three to ten years depending on how long you were UK resident, making it harder to escape IHT liability quickly.

Common Misconceptions

Myth: "Deemed domicile is the same as residence or nationality"

Reality: Deemed domicile, residence, and nationality are three completely separate legal concepts. UK residence is about physical presence in the UK during a tax year. Nationality is about citizenship and passport status. Deemed domicile is a tax status triggered by prolonged UK residence that treats you as UK domiciled for IHT purposes. You can be UK resident without being deemed domiciled, and you can hold a UK passport while being non-UK domiciled.

Myth: "I can choose whether to be deemed domiciled or avoid it through careful planning"

Reality: Deemed domicile is an automatic status determined by objective facts—specifically, counting your UK-resident tax years. You cannot elect in or out of deemed domicile status. If you've been UK resident for the required period (15 out of 20 years under old rules, 10 out of 20 under new rules), you are deemed domiciled whether you like it or not. The only way to avoid it is to leave the UK before reaching the threshold, and even then, tail provisions mean IHT liability continues for years.

  • Domicile of Origin: The foundational domicile acquired at birth that deemed domicile can override for tax purposes.
  • Domicile of Choice: An acquired domicile that deemed domicile can override for tax purposes regardless of where you consider your permanent home.
  • Inheritance Tax (IHT): The tax whose scope deemed domicile determines—expanding liability from UK assets only to worldwide assets.
  • Non-Domiciled: The contrasting status where IHT applies only to UK assets, which deemed domicile removes.
  • Long-Term UK Resident: The new system that replaced deemed domicile from 6 April 2025, using a 10-out-of-20-year residence test.
  • Cross-Border Estate Planning: Deemed domicile transforms cross-border planning from "UK assets only" to worldwide estate planning strategies.
  • International Wills and Multi-Jurisdictional Estates: Your deemed domicile status determines whether your will should address only UK assets or your entire worldwide estate for IHT purposes.
  • Expat Estate Planning Guide: Essential reading for expats approaching the 10-15 year threshold who need to understand IHT implications.
  • UK Domicile Rules Explained: Provides complete domicile context showing how deemed domicile fits within the broader domicile framework.
  • Non-Dom Status and Tax Planning: Deemed domicile is the automatic mechanism that terminates non-dom tax advantages after prolonged UK residence.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.