Policy paper

Inheritance tax: anti-avoidance

Published 26 November 2025

Who is likely to be affected

This measure will affect:

• individuals who are not long-term UK residents, and their trusts, who own UK agricultural land and buildings indirectly
• trustees of trusts where the settlor is not a long-term UK resident
• individuals gifting to a charitable trust which is not a charity

General description of the measure

This measure will prevent opportunities to use situs of personal or trust property to avoid Inheritance Tax (IHT) or pay less than long-term UK residents.

The legislation will look-through non-UK companies or similar bodies to treat UK agricultural land and buildings as situated in the UK for IHT purposes. This follows the existing treatment for UK residential property. 

Where a settlor ceases to be a long-term UK resident, there will be an IHT charge if there is a later change in situs of their trust assets from UK to non-UK, so that the trust cannot manipulate situs rules to avoid an exit charge.

In line with other taxes, IHT charity exemption will be restricted to gifts made directly to UK charities and community amateur sports clubs. Gifts to trusts which do not meet the required charity or club definition will not be exempted as they may not have UK jurisdiction or be regulated. This change does not affect the separate IHT regime for property held in trusts.

Policy objective

The government is committed to addressing unfairness in the tax system, so that everyone who is long-term resident in the UK pays their taxes here. This measure will help ensure that situs of certain personal or trust property, or the treatment of some trusts, cannot be used to avoid tax or pay less IHT than long-term UK residents would pay.

Background to the measure

This measure was announced at Budget 2025.

The IHT reforms announced at Autumn Budget 2024 and taking effect from 6 April 2026 mean there will be 100% rate of relief for the first £1 million of combined agricultural and business assets, and then a 50% rate of relief thereafter.

Current anti-avoidance provisions look through offshore structures in relation to UK residential property. This means that if an individual is not a long-term UK resident, they or their trusts cannot change the nature of UK residential property to be an interest in a non-UK company and so be outside the scope of IHT. The government announced at Budget 2025 it will extend this treatment to UK agricultural property.

From 6 April 2025, the test for whether an individual’s non-UK personal or trust assets are in scope for Inheritance Tax is whether they are a long-term UK resident: in basic terms when they have been resident for at least 10 out of the previous 20 years. There may be a charge of up to 6% when non-UK property in a trust goes out of scope of IHT because of the change in status of the settlor. This measure will prevent trustees seeking to avoid this by bringing assets to the UK before the change in the settlor’s status, and then after the change siting the assets overseas again where they are outside the scope of IHT.

Changes were made to the tax definition of charity in schedule 6 to Finance Act 2010 in Finance (Number 2) Act 2023 to restrict relief across multiple taxes, including the IHT exemption in respect of gifts to UK charities. This measure will provide a correction to the separate IHT rule for gifts to charitable trusts so that they must meet the wider definition of a charity with ensuing jurisdiction and regulatory requirements.

Detailed proposal

Operative date

The changes will take effect for trust exit charges from 26 November 2025, gifts to charities in lifetime from 26 November 2025 or on a death from 6 April 2026, and for UK agricultural property from 6 April 2026.

Current law

Current law is contained in the Inheritance Tax Act 1984.

Proposed revisions

Schedule A1 (non-excluded overseas property) will be amended to include new sections 7A and 7B to add UK agricultural property to the existing treatment for UK residential property.

New subsections 8B and 8C will be added to section 65 (relevant property: exit charges) to disapply the exit charge exemption in the required circumstances from 26 November 2025.

Section 23 will be amended to remove references to trusts for charitable purposes or for community amateur sports clubs (CASC) purposes. A new subsection will preserve the exemption when an existing interest in possession ends in favour of a charitable or CASC purpose trust which pays out to a charity or CASC.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
negligible	negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer.

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure will impact on an unknown number of individuals, by preventing avoidance behaviour, by way of using situs of personal or trust property to avoid IHT or pay less than long-term UK residents.

These individuals will need to familiarise themselves with the changes. Fewer than 50 may need to reframe charitable gifts in their will that are not made directly to qualifying charities.

This measure is not expected to impact on family formation, stability or breakdown.

This measure is expected overall to have no impact on individual experience of dealing with HMRC as this change is a revision to the legislation to ensure non-long-term residents pay the same tax as long-term residents.

Equalities impacts

An individual may be affected by this measure regardless of their protected characteristics. If a protected group is overrepresented in this population, then it will be disproportionately impacted.

HMRC cannot identify the individuals that will be affected by this measure. However, the majority of IHT is paid by estates of individuals aged 75 or over (81%). IHT is also paid by the estates of slightly more women than men. One reason for this is that marriages and civil partnerships in the UK are predominantly between opposite sex individuals, as outlined by the Office for National Statistics (ONS). Men generally die at a younger age and those in a marriage or civil partnership will normally pass on all, or a large percentage, of their estate to their spouse or civil partner tax-free. For the period 2020 to 2022, life expectancy at birth in the UK was 4 years longer for women, according to the ONS.

HMRC does not hold data on the other protected characteristics of deceased individuals with estates liable for IHT and so cannot make an assessment of the impacts on those with shared protected characteristics. 

Administrative impact on business including civil society organisations

There is no impact on businesses as this measure only affects trusts and estates. Charities and community amateur sports clubs should be unaffected as exempt gifts can be made to them in the usual way. Charitable trusts created by will are already able to register as a UK charity where the jurisdiction and other regulatory requirements are met.

Trusts and estates practitioners may have one-off familiarisation costs. It is not anticipated there will be continuing costs.

This measure is expected overall to have no impact on business experience of dealing with HMRC as this change is a revision to the existing residence-based regime and charity rules.

Operational impact (£ million) (HMRC or other)

There are no changes to HMRC forms or IT systems. HMRC processing and compliance resources are not impacted.

Appropriate taxpayer guidance will be published on GOV.UK.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through disclosures of new avoidance schemes to circumvent the measure, and through regular communication with affected taxpayers and practitioners.

Further advice

If you have any questions about this change, email: personaltaxinternational@hmrc.gov.uk.