IHTM47038 - Long-term UK residence: Spousal long-term UK residence elections – consequences of making an election
Source: gov.uk (2025-04-07)


The rules for spousal domicile elections prior to 6 April 2025 can be found at IHTM13040 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm13040) – IHTM13049 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm13049). Transitional provisions apply to existing spousal domicile elections and those made on or after that date and can be found at IHTM47041 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47041).

When an election is made, (IHTM47034 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47034)) the person making the election will be treated as a long-term UK resident (IHTM47000 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47000)) for all Inheritance Tax (IHT) purposes from the date stated in the election (IHTM47037 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47037)). Consequently, any transfers between spouses or civil partners made after that date qualify for full spouse or civil partner exemption.

Whether to make an election and the date it is take effect from will require careful consideration as it could mean that a transfer that did not give rise to a charge at the time it was made, proves to be chargeable.

Once an election is made, it cannot be revoked and will only lapse after 10 consecutive years of non-UK residence.

Example

Frank, who is a long-term UK resident transfers property worth £1m in 2027 to his spouse, Jessica who is not a long-term UK resident. Subsequently, in 2029, Jessica transfers some Spanish shares to the trustees of an offshore trust. Frank dies later in 2029.

At the time of Frank’s transfer, the value transferred is exempt to the extent of the nil rate band at the time, currently £325,000 and a potentially exempt transfer (PET) (IHTM04057 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04057)) to the extent of £675,000. Following his death, the failed PET is chargeable and after deducting the nil-rate band, £350,000 is subject to tax.

Jessica’s transfer was a transfer of excluded property, IHTA84/S6(1). Following Frank’s death, Jessica has the choice of electing to be treated as long-term UK resident. If she does so, the gift from Frank in 2027 will become fully exempt as a transfer where both spouses are long-term UK resident.

However, Jessica will then be treated as a long-term UK resident from 2027 for all IHT purposes. This means that her transfer to the trustees is no longer one of excluded property and will be subject to IHT. As a transfer to a trust, it will be immediately chargeable to tax.

Jessica will need to consider all the consequences of making an election. Should she decide to go ahead with the election, the requirements to deliver an account in respect of the transfer and the changes to the due dates for tax and interest are set out at IHTM47039 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm47039).

Such an election does not apply when considering a person’s long-term UK residence in connection with:

Any existing double taxation convention (IHTM27161 (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm27161)) IHTA84/S267ZF(3) and (4)