Inheritance Tax Reforms – Finance Act 2025
Pension pots (unused funds/death benefits) will be included in taxable estates from 6 April 2027, increasing the IHT burden for many estates.
Agricultural Property Relief (APR) and Business Property Relief (BPR)
From 6 April 2026, a combined £1 million allowance applies for APR & BPR at 100% relief. Above that, only 50% relief applies (effective IHT rate of ~20%).
APR will also be extended from 6 April 2025 to include land under environmental management agreements.
These reforms aim to protect smaller estates, but increase IHT liabilities on larger generational transfers.
Tax Residency and Domicile
End of Non-Dom Regime & New Residence-Based IHT
“Non-dom” overhaul – residence-based regime from 6 April 2025.
HMT/HMRC policy confirms the abolition of the remittance basis, replaced with a four-year foreign income & gains (FIG) regime for new arrivals (after 10 consecutive non-resident years).
Transitional rules apply for existing non-doms. (Also interacts with trusts and FIG matching.)
The regime offers 100% relief for the first four years of UK residence.
Individuals who have lived in the UK for 10 of the last 20 tax years become Long-Term Residents (LTRs) and are subject to IHT on worldwide assets.
A Temporary Repatriation Facility (TRF) allows people already in the UK to repatriate foreign income at a flat rate of 12% in the first two years (2025–2027), rising to 15% in the third year (2027–2028).
Excluded Property Trusts
Trusts previously considered excluded property (outside IHT scope) now lose that status if the settlor becomes an LTR or resides in the UK long term.
This exposes trust assets to IHT and periodic charges.
Case Law
A Taxpayer v HMRC [2025] Court of Appeal (EWCA Civ 106) (20 Mar 2025)
The Court of Appeal restores the FTT’s decision on the Statutory Residence Test: “exceptional circumstances” can include compelling moral obligations (not only legal/physical impossibility) preventing departure; largely a fact question for the FTT.
Useful for day-count disputes (e.g., illness/care scenarios). Significant in structuring for trusts and wealth planning, especially where assets are shifted via corporate vehicles.
Accuro Trust (Switzerland) SA v HMRC [2025] UKFTT 464 (TC) (28 Apr 2025; released Jul 2025)
FTT held assets added to an excluded-property trust remained excluded even after the settlor later became (deemed) UK-domiciled; IHT paid on the mistaken basis was repayable.
Important on IHT charges for offshore trusts where domicile status later changes.
Ramana v Kist-Ramana [2025] Court of Appeal (EWCA Civ 1022)
Reaffirms that domicile is not turned on and off by physical moves alone, but hinges on intention, assessed through the full narrative of a person’s tie to a jurisdiction.
Pivotal case in domicile disputes, offering clearer structure on burden and evidence—not just for divorce cases but also succession and tax.
Sidoli & Anor v Sidoli & Anor [2025] High Court of Justice (EWHC) 1425 (Ch)
Decision affirming that foreign succession judgments—even if they involve monetary orders—are generally not enforceable under the Foreign Judgments (Reciprocal Enforcement) Act 1933 in England and Wales.
The Court concluded that the Italian court lacked jurisdiction under English principles on succession matters.
The case underlines the necessity of characterising the legal nature of the claim and insists on adherence to domestic succession principles and limitations on foreign jurisdiction.
5 September 2025
By: Jessica Zama, Russell-Cooke, London (United Kingdom)
