Under the UK rules in force for 2026/27, UK land and buildings generally remain within the scope of UK inheritance tax (IHT) whatever your residence status, because they are UK assets. Leaving the UK may take your overseas assets out of the IHT net once you are no longer a long-term UK resident, but UK property, whether owned directly or, for residential property, through an overseas company, generally stays in scope.

Why UK property stays in the net

For many individuals, the domestic inheritance tax test now focuses on long-term UK residence rather than domicile. Domicile remains relevant in some treaty, transitional and anti-avoidance contexts. Broadly, you are a long-term UK resident if you were UK tax resident for at least 10 of the previous 20 tax years. After you leave, that status can continue for a "tail" of between 3 and 10 tax years. The length depends on your count of UK tax-residence years, and a split year may count as a full year for these purposes, so the calculation needs checking against the statutory rules rather than assumed.

When you are no longer a long-term UK resident, property situated outside the UK becomes "excluded property". The exclusion only covers non-UK assets (and a few specific items, such as holdings in UK authorised unit trusts and open-ended investment companies). A house, flat or buy-to-let in the UK is a UK asset, so it is not excluded property when held in your own name.

This is the point many expats miss. Someone who has been in Dubai for 15 years, and is beyond their tail period, may have no UK IHT exposure on their UAE savings and overseas portfolio, but their London flat is generally still in scope.

What about holding it through a company?

Before April 2017, some non-UK domiciled owners held UK homes through an overseas company. The shares were a non-UK asset, which could keep the property outside IHT.

That route was largely closed. Under Schedule A1 to the Inheritance Tax Act 1984, interests in overseas close companies and partnerships are not excluded property to the extent their value comes from UK residential property. Certain related loans and security are also caught. From 6 April 2026 the same rules extend to UK agricultural property.

The position for UK commercial property held through companies is more technical and depends on the structure, so it needs specific advice.

What reduces the bill

Being in scope does not automatically mean tax is payable. Reliefs that may apply to non-residents include:

  • Nil rate band: the first GBP 325,000 of your chargeable estate is taxed at 0%. This is frozen until 5 April 2031.
  • Residence nil rate band: up to GBP 175,000 more may be available if a home you lived in passes to children or grandchildren, subject to conditions and tapering on estates above GBP 2 million.
  • Spouse or civil partner exemption: transfers between spouses are normally exempt. The exemption is capped at GBP 325,000 where the person giving is a long-term UK resident and the spouse receiving is not.
  • Debts: a mortgage secured on the property may reduce its value for IHT, subject to rules on how and why the borrowing was taken out.

For how this fits with your wider estate, see our guide on inheritance tax for UAE resident UK nationals.

A worked example

Illustrative example only, not a real client.

Sarah moved to Dubai in 2012 after 12 years in the UK. Assuming her UK tax-residence history has been checked and she is no longer a long-term UK resident, she owns:

  • A UK flat worth GBP 600,000 with no mortgage
  • UAE savings and an offshore portfolio worth GBP 1,000,000, none of it UK assets

She leaves everything to her adult nephew, so neither the spouse exemption nor the residence nil rate band applies. Assuming no lifetime gifts, no other UK assets and no other reliefs:

  • UAE and offshore assets: excluded property, outside UK IHT on these assumptions
  • UK flat: GBP 600,000 in scope
  • Less nil rate band: GBP 325,000
  • Taxable: GBP 275,000 at 40% = GBP 110,000

If Sarah were still a long-term UK resident, her whole GBP 1.6 million estate would be in scope.

Other points to keep in mind

The UAE has no inheritance tax treaty with the UK. The UK has IHT treaties with a short list of countries, including the US, Ireland, France, Italy and the Netherlands, and a treaty may change the outcome.

In England and Wales, your family will usually need a grant of probate before UK property can be sold or transferred, and any IHT reporting generally has to be dealt with before applying. Probate and confirmation procedures differ between England and Wales, Scotland and Northern Ireland.

Common mistakes

  • Assuming that once you are non-resident, nothing you own is subject to UK IHT
  • Relying on an old overseas company structure to keep a UK home outside IHT
  • Assuming the spouse exemption is always unlimited, or always capped, without checking both spouses' residence status
  • Assuming your tail period has ended without counting your UK tax-residence years

A regulated financial adviser can help. Get in touch for a free introduction.

Sources and further reading

Last reviewed: October 2026. Tax year: 2026/27. Jurisdictions covered: UK, UAE. Rates, legislation and guidance change, so recheck before relying on this. Rules can differ between England and Wales, Scotland and Northern Ireland; tax residence is fact-specific; treaty outcomes depend on residence, domicile or nationality provisions; examples are simplified and omit reliefs, costs, exchange rates and anti-avoidance rules. This is general information, not financial, tax or legal advice. Take advice in the relevant country before acting.