From 6 April 2025, the UK will move to a new residence-based system for Inheritance Tax (IHT), marking one of the most significant shifts in the taxation of wealth in recent decades. These changes will affect not only long-term UK residents, but also internationally mobile individuals who may have previously relied on their non-domiciled status for IHT planning.

What Is Changing?

At present, UK IHT is based on domicile. UK domiciliaries are taxed on their worldwide assets, while non-doms are only subject to IHT on their UK situs assets, unless they become “deemed domiciled” after 15 years of UK tax residence.

From 6 April 2025, the domicile test will be replaced. Under the new rules:

• Individuals who have been UK tax resident for at least 10 out of the previous 20 tax years will become long-term residents and fall within the scope of UK IHT on their worldwide estate.
• Long term resident individuals who leave the UK will continue to be exposed to UK IHT on their worldwide assets for a period ranging from 3 to 10 years, depending on how long they were UK resident before departure.

What About Trusts?

The treatment of Trusts will also change. From 6 April 2025, settlor interested trusts will no longer provide protection from UK taxation on income or gains arising within them when the settlor no longer qualifies for the FIG regime. While there will remain an element of IHT protection, these Trusts will be brought within the UK’s relevant property regime.

This means:

• Trusts will be subject to IHT charges of up to 6% every 10 years on the value of the assets within the Trust
• An additional exit charge may apply when capital is distributed.
• Once in the relevant property regime, a further pro rata exit charge will apply if and when the settlor ceases to be a long-term UK resident.

It could take seven full 10-year cycles of IHT charges at 6% for the tax payable by a Trust to exceed the IHT payable if the same assets were held personally and taxed at 40% on death. Nonetheless, the administrative burden and cashflow impact of these periodic and exit charges should not be underestimated.

Broader Changes on the Horizon

Alongside the shift to residence-based taxation, further IHT reforms are expected in the coming years:

• From 6 April 2026, the Government plans to introduce a cap on Business Relief and Agricultural Relief, limiting 100% relief to the first £1 million of qualifying assets.

From 6 April 2027, unused pension funds will also become subject to IHT on death,

What Does This Mean in Practice?

Now that the new rules are in force, many long-standing estate plans and asset-holding structures must be reassessed under the new regime.

This includes:

• Reviewing the relevance and efficiency of existing offshore Trusts.
• Reassessing asset ownership between family members and across jurisdictions.
• Ensuring clear documentation for residency status and historic Trust arrangements.

The new residence-based approach brings complexity, particularly for internationally mobile individuals and non-doms who previously relied on the excluded property regime. While the window for new planning has now closed, it remains important to ensure that existing structures are compliant and do not trigger unnecessary tax exposure under the new rules.

Final Thoughts

The move to a residence-based IHT regime represents a fundamental change in how the UK taxes wealth at death. For those with international lives or assets, this is a key moment to take stock. For more information on this or to speak to one of our experts, please use our enquiry form or email us at hello@dixcartuk.com.

At Dixcart, we work closely with individuals and families to provide clear, tailored advice in light of changing legislation.

Gifting assets during your lifetime can be an effective estate planning tool—but it must be done carefully to avoid unexpected inheritance tax (IHT) consequences.

One of the most common traps is a Gift with Reservation of Benefit (GWROB). This arises where an individual gives away an asset, typically a property, but continues to benefit from it. A classic example would be gifting your home to your children and continuing to live in it rent-free.

Why It Matters?

Under UK rules, a GWROB means the asset is still considered part of your estate for IHT purposes, regardless of legal ownership. In practice, this can result in the asset being taxed on death, defeating the objective of making the gift in the first place.

Can It Be Avoided?

Yes, in some cases. Common exceptions include:

• Paying full market rent for continued use of the gifted asset.
• Gifting to a spouse or charity, which are exempt from IHT.
• Shared occupation: If you give away part of your home and continue to live in it with the new co-owner (e.g. your child), and you each occupy your respective share without deriving a benefit from the other’s portion, a GWROB may not apply. The conditions here can be technical and should be reviewed carefully.

These scenarios must be properly structured and documented to ensure the gift qualifies as genuine in the eyes of HMRC.

What If You’ve Already Made a Gift with Reservation?

If you have already gifted an asset but still benefit from it (for example, continuing to live in a property you have transferred), there may still be planning opportunities.

Releasing a reservation, such as moving out of the property or beginning to pay market rent, can stop the GWROB from applying going forward. However, doing so creates a new potentially exempt transfer (PET) at the time the benefit is given up. If the individual dies within seven years of that point, the PET becomes chargeable to IHT.

It is also worth noting that double charges relief may apply where both the original gift and the retained benefit could theoretically be taxed, ensuring the value is not taxed twice, but usually at the higher amount.

Illustration – Avoiding GWROB by Paying Market Rent

Mr and Mrs James gift their London home to their adult children but continue to live in the property. To avoid the gift being caught by the GWROB rules, they agree to pay their children a full market rent, reviewed annually. The rental income is declared by the children as part of their income tax return.

As long as the arrangement is properly documented and the rent reflects true market value, the property will not be treated as part of Mr and Mrs James’s estate after seven years—potentially saving significant IHT.

A Brief Note on Upcoming IHT Changes

The Spring Budget 2024 announced a shift from a domicile-based IHT system to a residence-based regime, effective from April 2025. This means long-term UK residents, regardless of domicile, may be subject to IHT on their worldwide estate.

This change will bring many more individuals, especially internationally mobile families, within the UK IHT net. As such, gifting strategies (and their interaction with GWROB rules) may become more relevant and should be reviewed in light of the evolving tax landscape.

Next Steps

Gifting can be a powerful part of your estate strategy, but the rules around GWROB are complex. If not handled correctly, a well-intended gift could have unintended tax consequences.

If you are considering passing assets to family members, especially property, we recommend speaking to one of our advisers first by emailing us at hello@dixcartuk.com. At Dixcart, we assist clients with structuring lifetime gifts in a way that aligns with both tax efficiency and family intentions.

Private Residence Relief (PRR) is one of the most valuable tax reliefs available to individuals in the UK. It can exempt all or part of the gain made on the sale of your home from Capital Gains Tax (CGT). But while the concept seems straightforward, the rules can be complex, especially when the property has not been your only, or full-time, residence throughout ownership.

This article outlines how PRR works, who qualifies, and what you need to consider if you’re selling (or gifting) a property.

What Is Private Residence Relief?

PRR provides relief from CGT when you dispose of a property that has been your main or only residence during your period of ownership. In many cases, this means that the entire gain on sale is exempt.

To qualify, you must:

• Own the property;
• Have lived in it as your main home (not just visited);
• Not have let it out (other than under permitted lettings relief);
• Not have used it wholly for business purposes.

How Much Relief Can You Get?

If the property has been your only or main residence throughout your entire period of ownership, any capital gain arising from a disposal will typically be fully exempt from CGT.

Where the property has not been your main residence throughout the full period of ownership, the gain is apportioned based on:

• The period it was your main residence;
• Plus the final nine months of ownership (which qualifies automatically, even if you no longer live there).

For example:

If you owned a house for 10 years and lived in it as your main home for 6 years, then rented it out for 4 years before selling it, you could be entitled to relief for 6 years plus 9 months, meaning 69 months out of 120 months (10 years) would be exempt.

The remaining gain would be chargeable and may be subject to lettings relief if applicable.

Lettings Relief

Lettings relief used to be a generous exemption, but since April 2020 it is now only available if you were in shared occupation with your tenant. In most cases, this means the scope of lettings relief is very limited.

If available, it can exempt up to £40,000 of gain (or £80,000 for couples) attributable to the let portion of the property.

Nomination of Main Residence

If you own more than one property, you may choose which one should be treated as your main residence for PRR purposes by making a nomination to HMRC. This must be done within two years of acquiring the second property.

The choice does not have to be based on where you spend most of your time—you simply need to demonstrate some level of occupation and interest.

The rules can be complex, and so professional advice should be sought in this respect.

Gifting a Property

Gifting a property to a family member (e.g. your adult children) still counts as a disposal for CGT purposes, and the same PRR rules apply. If the property was your main home throughout, PRR may exempt the gain. But if it was not, a CGT charge could arise—even if no money changes hands.

This is particularly relevant in lifetime giving or estate planning contexts.

Pitfalls to Watch For

• Gaps in occupation: Time abroad or in a second home can reduce the exempt period.
• Delays in moving in: If you buy a house but do not move in promptly, this period may not qualify.
• Business use: Using part of your home exclusively for work (e.g. a photography studio) could restrict relief.
• Non-residents: Since 6 April 2015, non-residents are within the CGT net for UK property and can only claim PRR for periods where they met the UK day-count and presence conditions.

Planning Ahead

Private Residence Relief is generous but not automatic. Clear records, well-timed nominations, and careful planning around lettings, gifting, or emigration can all make a difference.

If you are considering selling or gifting a property, particularly one that has not always been your main home, professional advice can help you:

• Calculate potential gains;
• Identify available reliefs;
• Plan the disposal for optimal tax efficiency.

Reporting Residential Property Gains

You need to report the sale and any CGT due within 60 days of the completion date if the sale was completed on or after 27 October 2021. This can be done through HMRC’s online system.

When reporting the gain, you will need to provide details such as the property address, date of acquisition, date of sale, purchase price, sale price, and costs related to the purchase and sale.

Where the return is not filed within 60 days of the date of completion, an automatic late filing penalty of £100 will apply.

More information on reporting residential property gains can be found here: 60-days to Report Residential Property Gains – A Reminder.

How We Can Help

For more information on this or to speak to one of our experts, please use our enquiry form or email us at hello@dixcartuk.com.

At Dixcart, we work with individuals, families and trustees to navigate property disposals and ensure that available reliefs are claimed. If you are unsure whether PRR applies to your situation, or want to plan a future disposal, our private client team would be happy to help.

Additional amendments to UK R&D tax relief were included in the 2022 Autumn Statement.

From 1 April 2023, we are expecting a number of changes to the UK R&D scheme. This addendum summarises the key points arising from the July 2022 HMRC published draft legislation for R&D tax relief changes, announced in the 2021 Autumn Budget.

These Autumn Budget changes will take effect for accounting periods beginning on or after 1 April 2023. The changes will impact companies claiming under either of the two schemes (SME or RDEC).

The government has a target to raise investment in R&D to 2.4% of UK GDP by 2027 and R&D tax relief forms part of that goal by reducing the cost of innovation for UK companies.

Here are some of the key changes:

Extending Qualifying Expenditure

The good news is that R&D expenditure categories will be extended to include the costs of datasets and cloud computing – however, these costs need to clearly align with direct R&D and cannot be included in R&D claims where these costs only relate to indirect supporting activities.

In addition to this, R&D in pure mathematics will now qualify for relief and can form part of the qualifying R&D activities of the claimant.

Refocusing the Reliefs Towards Innovation Undertaken in the UK

One of the most fundamental changes in the Autumn Budget was to refocus the relief provided to activities performed in the UK or qualifying overseas expenditure.

• UK Expenditure

Relevant research and development must be undertaken in the United Kingdom. As such, subcontracted R&D work, and the cost of externally provided workers (EPWs), will be limited to work undertaken in the UK.

• Qualifying Overseas Expenditure

The exemption to the above, is where work undertaken outside the UK is necessary due to geographical, environmental, or social conditions not present or replicable in the UK. Cost of the work, and availability of workers, are specifically excluded as factors. This list is not exhaustive and, in the short term, is likely to create greater uncertainty as to what could be seen as meeting these criteria.

It is worth noting that, to date, there is nothing in the draft legislation that specifically addresses claims for the cost of staff working on projects in an overseas branch of a UK entity- it is hoped this will be clarified as the Bill goes through the Parliamentary process.

Tackling Abuse

In order to support HMRC’s fight against abuse of the R&D schemes, new due diligence and filing processes will be required through a digital system.

The changes to be introduced to the R&D claims submission process include:

1. claims be made digitally;
2. the categories of qualifying expenditure incurred need to be disclosed, and brief details provided of the R&D activities;
3. claims need to be endorsed by a named senior company officer;
4. the company must inform HMRC in advance of its intention to make a claim within six months of the end of the period to which the claim relates, unless the company has claimed in one of the preceding three accounting periods; and
5. the details of any agent who has advised the company in making the claim needs to be provided.

The most significant change is point 4. The effect of this is that new claimants will now only have a six month window in order to identify that they will make a claim, as opposed to the current two year window of opportunity.

What can your Business do to Help Maintain their R&D Tax Relief Benefits?

On the back of the above proposed changes, businesses that maintain all, or part, of their R&D activities overseas will need to re-evaluate their potential R&D claims. If your business falls into this category, you will need to consider the practical, commercial, and cost implications of maintaining your current structure versus onshoring to the UK. 

We have identified the pros and cons of each scenario below.

Scenario 1: Keeping your R&D Activities Overseas

Benefits of keeping your R&D activities abroad:

• commercial needs,
• expertise,
• most cost-effective option,
• changing something that isn’t broken. You have the right people, infrastructure and processes in place so why change it?

With the introduction of the new rules, the obvious loss is that qualifying overseas expenditure will be disqualified from 1 April 2023.

However, the impact of this depends on the type of business you are. For example, if you have an R&D intensive business with majority of costs arising from overseas activities, you should expect to see a substantial reduction in your R&D tax relief claims as opposed to one that is not R&D intensive.  

Scenario 2: Relocating your R&D Activities to the UK

As discussed above, the notable advantages and sacrifices of keeping your R&D activities overseas are in turn, for the short-term anyway, the opposite if you were to relocate the activities to the UK. This will of course depend on each business.

The main benefit of relocating your R&D activities to the UK is inevitably that it will qualify for R&D relief.

However, the change will effectively be like starting new again. The downside to this is the hassle of finding new suppliers and skilled workers, keeping within the budget, costs of relocating/restructuring, training, legal and tax considerations for both company and any employees relocating, etc.

Again, this largely depends on the business as, for some, this may simply be a matter of finding new suppliers within the UK.

Get in touch

If you would like to discuss the R&D tax relief changes announced in the Autumn Budget, or if you would like professional advice on maintaining R&D tax relief benefits, please get in touch: hello@dixcartuk.com.