UK Inheritance Tax rules have changed significantly, and the effect on British expats living in Thailand is not straightforward.
For some people who have lived outside the UK for many years, the new rules provide greater certainty and may remove Thai and other overseas assets from the UK Inheritance Tax net.
For others, particularly those who have recently left the UK, have a Thai or other foreign spouse or still hold a substantial UK pension, the position can be much less favourable.
From 6 April 2025, the UK moved away from domicile as the main test for whether overseas assets are subject to Inheritance Tax. Instead, the rules now focus primarily on your history of UK tax residence.
A further major change takes effect from 6 April 2027, when most unused pension funds and relevant pension death benefits will be brought into the estate for UK Inheritance Tax purposes.
For British expats in Thailand, the important questions are therefore:
- How many UK-resident tax years have you accumulated?
- When did you leave the UK?
- Are you still a long-term UK resident for Inheritance Tax purposes?
- Which assets remain within the UK IHT net?
- Do you still have a UK-established pension?
- Is your spouse also a long-term UK resident?
- Who will inherit your estate?
The answers can produce very different outcomes for people whose circumstances otherwise look very similar.
What the New Rules Probably Mean for You
The effect of the reforms depends mainly on your UK residence history, the assets and pensions you still hold and who will inherit from you. The table below gives a quick indication of where the main issues are likely to lie before we look at the rules in more detail.
Not Sure Which Situation Applies to You?
If your UK residence history, pension or family circumstances are unclear, our support team can help you work out what needs to be reviewed.
What Changed From April 2025?
Until 5 April 2025, domicile played a major role in determining whether someone’s worldwide estate was subject to UK Inheritance Tax.
Domicile is a legal concept rather than simply a question of where somebody lives. For a British person who had moved permanently to Thailand, there could still be uncertainty over whether a UK domicile of origin had genuinely been replaced.
From 6 April 2025, the central question is instead whether you are a long-term UK resident for Inheritance Tax purposes.
This is a UK tax status. It has no connection with Thailand’s Long-Term Resident visa.
Broadly, if you are a long-term UK resident, your worldwide estate can remain within UK IHT.
If you are not, personally owned assets outside the UK will generally fall outside the UK IHT net, although UK assets, pensions, trusts and some other categories need separate consideration.
Importantly, British nationality itself is not the test.
Two British citizens living next door to each other in Thailand can have very different UK Inheritance Tax positions because their UK residence histories are different.
What Is a Long-Term UK Resident?
Broadly, you are a long-term UK resident for Inheritance Tax purposes if you have been UK tax resident in at least 10 of the previous 20 tax years.
The years do not need to be consecutive.
Residence therefore needs to be considered tax year by tax year rather than by simply counting how many calendar years you have lived outside Britain.
For tax years from 2013/14 onwards, residence is normally established using the Statutory Residence Test. Earlier years need to be considered under the residence rules that applied at the time.
This matters because the 20-year lookback can still reach into the period before the Statutory Residence Test existed.
A tax year receiving split-year treatment also counts as a UK-resident year for this Inheritance Tax test.
For anyone with an irregular residence history, periods working overseas or a departure close to the start or end of a tax year, the calculation may therefore need to be reconstructed carefully.
Leaving the UK Does Not Immediately End Worldwide IHT Exposure
Becoming non-UK resident does not necessarily mean your overseas assets immediately leave the UK Inheritance Tax net.
Once you have become a long-term UK resident, that status can continue for several tax years after you leave Britain.
This is often described as the IHT tail.
The important point is that becoming non-UK resident does not immediately end your long-term UK resident status for Inheritance Tax purposes. Once you have built up that status, you generally need to complete a period of consecutive non-UK residence before it falls away.
How long that takes depends on how many UK-resident tax years you had accumulated before leaving.
For example, someone who had been UK resident throughout the previous 20 tax years before moving to Thailand can remain a long-term UK resident for IHT purposes for up to 10 tax years after leaving. During that period, their Thai and other overseas assets can still form part of their UK taxable estate.
Someone who has spent most or all of their adult life in Britain before moving to Thailand may therefore remain within UK IHT on their worldwide estate for up to 10 tax years after leaving.
Buying a condominium in Thailand, moving investments offshore or becoming Thai tax resident does not by itself remove those assets from UK IHT while you remain a long-term UK resident.
After 10 consecutive tax years of non-UK residence, the residence test effectively resets.
What About People Who Left Around the Change of Rules?
Special transitional rules can apply to some people who left around the introduction of the new residence-based regime.
However, this special treatment does not apply to somebody who was UK domiciled under general law on 30 October 2024. That is particularly important for many British expats with a UK domicile of origin, who should not assume that the old three-year domicile tail continues to determine their position.
The transitional rules are more relevant to people who were formerly non-domiciled or deemed domiciled under the old system.
Anyone who left the UK around the change of rules, or who later returns to UK residence, should check their exact residence history rather than relying on a general rule of thumb.
Long-Established Expats in Thailand May Be Better Off
The reforms are not universally negative.
For many British people who have already lived in Thailand for a long time, the move away from domicile can provide significantly greater certainty.
Once somebody is no longer a long-term UK resident, personally owned overseas assets will generally fall outside UK Inheritance Tax.
Depending on how they are held, that can include assets such as:
- Thai bank accounts
- A personally owned Thai condominium
- Overseas investment portfolios
- Thai business interests
- Other qualifying non-UK assets
For somebody who has been permanently established in Thailand for many years, that can be a significant improvement.
However, it does not mean UK Inheritance Tax has disappeared.
UK assets can remain exposed and, from April 2027, a UK-established pension can create a separate problem.
UK Pensions Become a Major IHT Issue From April 2027
From 6 April 2027, most unused pension funds and relevant pension death benefits will be brought into a person’s estate for UK Inheritance Tax purposes.
The legislation refers to this value as notional pension property.
This is a major change because pensions have often sat outside the estate for IHT purposes. From April 2027, that will no longer be the case for many unused pension funds and death benefits.
Not every pension benefit is caught and different types of scheme can be treated differently. Anyone with a substantial UK pension should therefore establish what type of pension they hold, what happens to it on death and who the beneficiaries are.
Does Your UK Pension Stay Within UK Inheritance Tax?
For British expats in Thailand, the answer depends first on whether you are still a long-term UK resident for Inheritance Tax purposes.
If you are still a long-term UK resident, relevant pension benefits can fall within UK IHT regardless of where the pension scheme is established.
If you are no longer a long-term UK resident, a pension held in a scheme established in the UK can still remain within UK IHT even though your Thai and other overseas assets may have fallen outside the UK tax net.
This can produce a surprising result.
Someone may have lived in Thailand for 20 years and have a Thai condominium, Thai bank accounts and overseas investments outside UK IHT, while their UK-established pension remains within the UK IHT system from April 2027.
For some long-established British expats, the pension could therefore become their largest remaining UK IHT exposure.
Moving a UK pension overseas is not a simple solution. Transfers can create separate tax, regulatory and investment consequences, including a potential 25% Overseas Transfer Charge in many cases where a Thailand resident transfers to a QROPS established in another country.
The Spouse Exemption Can Be Restricted
Transfers between spouses or civil partners are often described as completely exempt from UK Inheritance Tax.
That is not always the case.
Where the person making the transfer is a long-term UK resident but the receiving spouse is not, the normal unlimited spouse exemption is restricted to £325,000.
The restriction is cumulative, so previous qualifying transfers between the spouses can use part of that amount.
A spouse who is not a long-term UK resident can elect to be treated as one for IHT purposes, potentially restoring the unlimited exemption. However, this can also bring their own worldwide estate within UK IHT, so the wider consequences need to be considered.
What Does This Mean for a Thai Spouse and a UK Pension?
From April 2027, the same issue can matter when pension death benefits pass to a Thai spouse.
A British expat who remains a long-term UK resident and intends to leave a substantial UK pension to a Thai spouse who has never lived in Britain should not assume the whole pension will automatically qualify for unlimited spouse exemption.
Even where pension benefits do pass under an unlimited spouse exemption, this can defer rather than permanently remove the IHT issue. Unused benefits remaining within a UK-established pension arrangement may need to be considered again on the surviving spouse’s later death.
UK Assets Can Still Remain Within IHT
Once you are no longer a long-term UK resident, personally owned non-UK assets will generally fall outside UK IHT.
UK assets are different.
As a broad guide:
- UK land and property are UK-situated
- UK bank accounts can be UK-situated
- Shares in UK-registered companies will generally be UK-situated
- Certain interests in offshore companies or partnerships deriving value from UK residential property can also remain within UK IHT
Putting UK residential property behind an offshore entity does not necessarily turn it into an exempt overseas asset.
There are also specific exclusions for some investments and accounts.
The important point is that the legal location, or situs, of an asset should be established rather than guessed from the currency, investment platform or correspondence address.
The Main UK IHT Allowances
UK Inheritance Tax is generally charged at 40% on the taxable part of an estate above the available exemptions and allowances.
The ordinary UK Inheritance Tax nil-rate band remains £325,000.
Where the conditions are met, a further Residence Nil Rate Band of up to £175,000 may be available where a qualifying residence passes to direct descendants.
Both thresholds are currently frozen until 5 April 2031.
The Residence Nil Rate Band begins to taper once the value of the estate exceeds £2 million, reducing by £1 for every £2 above that level.
This becomes particularly relevant from April 2027 because bringing notional pension property into the estate may push the total above £2 million and reduce or eliminate an allowance that might otherwise have been available.
Can a Thai Home Qualify for the Residence Nil Rate Band?
Potentially, yes.
There is no general rule requiring the qualifying residence itself to be in the UK.
If somebody remains a long-term UK resident, their worldwide estate can be within UK IHT. A Thai home can therefore potentially support a Residence Nil Rate Band claim if it forms part of their taxable estate, has genuinely been their residence and passes to qualifying direct descendants.
A personally owned Thai condominium is the clearest example. More complex ownership arrangements, including property held through a Thai company, leases or personal rights such as usufructs, should not automatically be assumed to qualify.
If somebody is no longer a long-term UK resident, their Thai home will normally be outside their UK taxable estate. In that situation there is no taxable overseas residential interest for the allowance to attach to.
This is one example of why remaining within the UK residence-based IHT regime is not negative in every respect.
Lifetime Gifts Need Both UK and Thai Consideration
Lifetime gifting remains an important part of UK estate planning and the familiar seven-year rule continues to apply to many gifts.
But the new residence rules make timing more important.
The tax treatment of a foreign asset can depend on the donor’s long-term UK residence position when the transfer is made.
For a British expat in Thailand, there may also be a Thai tax consequence.
Thailand deals with certain gifts through its personal income tax rules, with exemptions including qualifying gifts from a spouse, ascendant or descendant and separate treatment for some other gifts.
The detailed Thai outcome can depend on the relationship between the parties, the recipient’s Thai tax position, the nature of the gift and how and when funds are brought into Thailand.
A substantial gift intended to improve a UK IHT position should therefore be checked from both the UK and Thai sides before it is made.
Other IHT Reforms May Affect Some Expats
The wider UK reforms also changed Agricultural Property Relief and Business Property Relief from April 2026.
A combined £2.5 million allowance now applies to qualifying agricultural and business property that would otherwise receive 100% relief, with 50% relief generally applying above the available allowance.
Unused allowance can transfer between spouses or civil partners.
The treatment of certain AIM shares and some foreign-listed shares has also changed.
These rules will affect a smaller proportion of British expats in Thailand, but they can be important for business owners or people who built investment portfolios around the previous IHT reliefs.
Trusts are another specialist area affected by the move from domicile to residence and should be reviewed individually where significant assets are held through offshore structures.
How Does Thai Inheritance Tax Work?
UK Inheritance Tax is only one side of the picture for somebody living, owning assets or leaving family in Thailand.
Thailand has its own inheritance tax regime.
A critical distinction is that the THB100 million threshold is not an estate-wide threshold.
It applies to each heir in relation to what that heir receives from each particular deceased person.
For example, if taxable assets worth THB240 million were divided equally between three children and each received THB80 million, none would exceed the THB100 million threshold from that deceased person.
Where the threshold is exceeded, the rates are generally:
- 5% on the taxable excess for an ascendant or descendant
- 10% for other taxable heirs
A surviving spouse is exempt.
The heir rather than the deceased’s estate is responsible for the tax and filing is generally required within 150 days where Thai inheritance tax is due.
The principal taxable asset classes include:
- Immovable property
- Securities covered by Thai securities law
- Deposits and similar claims
- Registered vehicles
- Other financial assets prescribed by Royal Decree
The Thai rules also distinguish between people domiciled in Thailand under immigration law and other heirs. This should not be confused with Thailand’s 180-day personal income tax residence test.
There Is No UK-Thailand Inheritance Tax Treaty
The UK and Thailand have a Double Taxation Agreement covering income taxes, but there is no UK-Thailand inheritance tax treaty.
That does not automatically mean the same property suffers the full amount of tax twice.
UK unilateral relief can provide credit where foreign inheritance or equivalent tax is charged on the same property.
Where an asset is situated in Thailand for UK purposes, Thai inheritance tax paid on it can normally be credited against the UK IHT attributable to that asset, subject to the statutory conditions and limits.
The absence of a treaty still matters because there is no comprehensive UK-Thailand agreement dealing with all possible conflicts and estate structures.
Three British Expats, Three Different Outcomes
David: Long-Established in Thailand
David has lived in Thailand for many years and is no longer a long-term UK resident.
His Thai condominium, Thai bank accounts and qualifying overseas investments may now be outside UK IHT.
However, he still has a substantial UK pension.
From April 2027, that pension may remain within UK IHT as notional pension property even though much of the rest of his estate is outside the UK tax net.
For David, the reforms can therefore be favourable for his wider estate while leaving an important pension issue to manage.
Sarah: Recently Moved to Thailand
Sarah spent virtually all of the previous 20 years living in Britain before moving to Thailand.
She becomes non-UK resident but remains a long-term UK resident for Inheritance Tax purposes because her departure tail has not expired.
Buying a Thai condominium and moving investments overseas does not immediately take those assets outside UK IHT.
However, if her Thai condominium has genuinely been her residence, remains within her taxable worldwide estate and ultimately passes to qualifying direct descendants, it could potentially support a Residence Nil Rate Band claim.
For Sarah, the critical calculation is when her UK Inheritance Tax residence tail actually ends.
Richard and Nok: British Husband and Thai Wife
Richard lives in Thailand but remains a long-term UK resident.
His Thai wife, Nok, has never lived in Britain.
Richard has significant assets and a substantial UK pension which he intends to leave to Nok.
He assumes that because they are married, everything can pass to her free of UK IHT.
That assumption may be wrong.
Because Richard remains a long-term UK resident and Nok is not, the restricted spouse exemption can apply. From April 2027, his UK pension may also form part of his estate as notional pension property.
Their planning therefore needs to consider Richard’s residence status, the pension, the spouse exemption and Nok’s own estate together.
What Should British Expats Review Now?
The reforms do not mean everybody needs to restructure their estate.
They do mean that planning based on the old domicile rules may no longer produce the expected result.
The key areas to review are:
- Your UK residence history: establish which tax years counted as UK resident
- Your IHT tail: if you have recently left, establish when long-term UK resident status ends
- Your UK and overseas assets: identify which assets remain within UK IHT
- Your pension arrangements: particularly before the April 2027 changes
- Your spouse’s position: especially in British-Thai marriages
- Your available allowances: including the effect of pensions on the Residence Nil Rate Band
- Your will: particularly if it was written before the recent reforms
- Significant lifetime gifts: check both UK and Thai consequences
- Existing trusts, business assets and older IHT investments: do not assume previous planning still works in the same way
Need Help Understanding Your Position?
UK Inheritance Tax can become particularly complicated when your residence history, pension, spouse and assets span both the UK and Thailand.
If you are unsure how the new rules may affect you, book a call with the Expat Tax Thailand support team. We can help you identify the issues that need to be reviewed and the appropriate next steps.
This article provides general information only and should not be treated as UK or Thai tax, legal, pension or investment advice. The application of inheritance tax, gift taxation and succession rules depends on individual residence histories, asset ownership, family circumstances and the law in force at the relevant time.
