Why domicile still matters after the 2025 IHT changes
min read- Domicile still matters: It continues to shape succession, wills and legal claims despite IHT changes.
- Asset classes may be treated differently: Different laws can apply to assets and property in different jurisdictions, leading to conflicting outcomes.
- Wills aren’t foolproof: Domicile can affect validity, impact revocation of wills on marriage and trigger unintended intestacy.
- Cross-border complexity: Poor domicile planning can lead to disputes, tax issues and unexpected inheritance results.
The replacement of the domicile-based inheritance tax regime with a residence-based test from 6 April 2025 has prompted some to question whether domicile retains practical significance. It does, and advisers who treat it as yesterday's problem risk exposing clients to succession failures, invalid wills, and unresolved cross-border conflicts. This article examines the areas where domicile continues to be determinative and highlights the pitfalls that practitioners should have firmly in mind.
How English Law Decides Who Gets What
When someone dies, English law draws a fundamental distinction between two types of property:
Moveable assets
Such as bank accounts, shares, and personal possessions like jewellery or vehicles. These are governed by the law of the country where the deceased was domiciled at death. If a person is domiciled in England, English succession law will generally apply to these assets wherever they are in the world.
Immovable assets
Meaning land and interests in land. These are governed by the law of the country where the property is situated. So a holiday home in France, for example, will be subject to French succession law, regardless of domicile.
This split can produce very different outcomes for different parts of an estate, particularly where another country's law imposes forced heirship rules that override the wishes expressed in a will. Practitioners advising internationally mobile clients must map each asset class against the applicable succession regime and stress-test the will structure accordingly.
A Will: Is It Valid?
Domicile can determine whether a will is recognised as legally effective, and even whether it has been unintentionally revoked.
Formal validity concerns whether a will has been properly executed
Under English law, a will must generally be signed by the person making it (the testator) in the presence of two witnesses, who must also sign in each other's presence and in the presence of the testator, in accordance with the Wills Act 1837. However, the Wills Act 1963 takes a wider approach for international families: English law will also generally recognise a will executed under the law of the country where it was made, or of a country with which the testator was connected by habitual residence, domicile, or nationality at the time the will was made or at death.
Material validity goes a step further
Even if a will is formally valid, the substance of its provisions may not be respected in every jurisdiction. A striking example arises with marriage: under English law, marriage automatically revokes an existing will unless the will was made in contemplation of that marriage. Under Scots law, it does not. This means that if you are domiciled in England and marry without updating your will, you could die intestate, with no valid will at all, even if you believed your earlier will remained in force.
Domicile is also relevant to questions of testamentary capacity and the construction of a will. In broad terms, the law of domicile will often determine legal capacity to make a will and whether the dispositions within it are essentially valid. Questions about how the language of a will should be interpreted are generally resolved by the law governing succession to the relevant assets, which in turn may depend on domicile.
What Happens If There Is No Will?
If you die without a valid will, known as dying "intestate", domicile plays a central role in determining who inherits your estate. Where a person domiciled in England owns only English assets, the English intestacy rules will generally apply across the whole estate. For those with assets in more than one country, the position becomes more complex:
Moveable assets will usually devolve according to the law of domicile, whilst real property abroad will typically pass under the local succession law of the country where that property is situated. This means that an English-domiciled person with, say, a property in Spain may find that local Spanish rules, potentially including forced heirship provisions, determine who inherits that property, regardless of what they might have wished.
Trusts and Domicile
Domicile has long been a cornerstone of international trust planning, and it continues to be relevant even after the recent reforms. Historically, the domicile of the person creating a trust (the settlor) at the time the trust was established determined how that trust was treated for inheritance tax purposes. Trusts set up by individuals who were not domiciled — or not deemed domiciled — in the UK have benefited from what is known as "excluded property" treatment for non-UK assets held within the trust. In practical terms, this meant those assets fell outside the scope of UK inheritance tax altogether.
Even following the abolition of the remittance basis and the move to a residence-based IHT regime, the treatment of existing trust structures and the transitional provisions continue to depend, at least in part, on the settlor's domicile at the time the trust was created.
Away from tax, the law of one’s country of domicile may also be relevant to determining if and how trusts are respected and how that impacts wider succession planning. There may be restrictions on the structures available to use to protect and pass on wealth.
Claims Against An Estate
Under the Inheritance (Provision for Family and Dependants) Act 1975, certain individuals (including spouses, children, and dependants) may apply to the court for reasonable financial provision from a deceased person's estate if they feel they have not been adequately provided for. However, the jurisdictional gateway is domicile: it is only possible to make a claim where the deceased died domiciled in England and Wales. If a person is domiciled elsewhere, the 1975 Act will not apply, which may significantly affect the rights of those who might otherwise have a claim.
Settling Past Tax Affairs After Death
When someone dies, their personal representatives must finalise the deceased's lifetime UK tax affairs. For individuals who have lived internationally, this can mean reviewing years in which domicile status was decisive, for instance, in relation to the remittance basis of taxation, deemed-domicile rules, or prior IHT reporting. Even though IHT is now determined by reference to residence, accurate evidence of historic domicile may still be needed to resolve outstanding tax matters and ensure that the estate is administered correctly.
Cross-Border Complications
Different countries use different connecting factors to determine which law applies to a person's succession. Some look to habitual residence, others to nationality, and others still to domicile. When English rules interact with a foreign system that points to a different jurisdiction, conflicts can arise.
One particular complexity is a doctrine known as "renvoi", where the succession law of one country refers the question to the law of another country, which in turn refers it back. This back-and-forth can create uncertainty and, in some cases, lead to unexpected or circular outcomes. For this reason, it is sensible to seek jurisdiction-specific advice during lifetime so that you understand how an estate is likely to be dealt with in each relevant country, and have the opportunity to take planning steps rather than leaving outcomes to chance.
In Summary
Domicile still matters, perhaps more than ever.
The shift to residence-based IHT has narrowed one area of relevance, but has done nothing to diminish domicile's role in succession planning, will validity, family provision, trust structuring, and the resolution of cross-border conflicts. Practitioners should continue to establish, document, and advise on domicile with the same rigour as before, and should ensure that clients understand that the 2025 reforms have not made domicile a matter of merely historic interest.
