Non-UK domiciled individuals who have a UK domiciled spouse or civil partner now have the option to elect to be treated as domiciled in the United Kingdom for inheritance tax (IHT) purposes.  This will enable them to receive gifts from their partner free from IHT during their partner’s lifetime and on their death.


Transfers of assets between spouses and civil partners, whether they are gifts made during an individual’s lifetime or transfers on death, are fully exempt from UK IHT, except where the transfer is from a UK domiciled, or deemed domiciled, spouse/civil partner to a non-UK domiciled, or deemed domiciled, spouse/civil partner.

Domicile is a common law concept and is not defined by statute for tax purposes.  Under general law, there are many types of domicile and, broadly, individuals are generally domiciled in the country in which their father was domiciled at the time of their birth (domicile of origin) or in the country where the individual has their permanent home and intends to settle permanently (domicile of choice).  Individuals domiciled in the United Kingdom are liable to IHT on their worldwide assets.  Individuals whose domicile lies outside the United Kingdom are only liable for IHT on assets situated in the United Kingdom.

The law has to date provided two circumstances in which an individual who is non-UK domiciled under the general law is deemed to be UK domiciled for IHT purposes (but for no other tax purposes):

  • If he or she has been UK domiciled for a three year period prior to a relevant transfer but is no longer UK domiciled.
  • If he or she lived in the United Kingdom for 17 out of 20 years ending with the year of assessment in which the relevant transfer occurs.

As of 6 April 2013, there is now a third way in which an individual who is not domiciled in the United Kingdom under the general law can be considered UK domiciled for IHT purposes.  This applies when:

  • an individual who is non-UK domiciled is married or in a civil partnership with a UK domiciled person and the non-UK domiciled individual makes an election to be treated as UK domiciled for IHT purposes.  If a UK domiciled spouse/civil partner dies on or after 6 April 2013, and an election had not been made during the lifetime of the non-UK domiciled spouse/civil partner, an election can still be made after the UK domiciled spouse/civil partner has died.

How Can an Individual Elect to be UK Domiciled?

Relevant individuals will be entitled to make the election once the Finance Act 2013 receives Royal Assent, which is likely to be in July 2013.  The election must be made in writing to HM Revenue & Customs and may be made at any time after marriage or registration of the civil partnership.  There is no prescribed form for the written election.  

Elections made while both individuals are still alive (lifetime elections) will take effect for transfers on or after the date of the election.  Where there has been a transfer as a result of the death of a UK domiciled individual, the surviving non-UK domiciled spouse/civil partner may elect to be treated as UK domiciled for IHT purposes from the date of death (death election).  Elections that follow a death will only be valid if they are made within two years of the death, and only where death occurs on or after 6 April 2013.

Can Election be Revoked?

Elections will be irrevocable while the electing individual continues to remain resident in the United Kingdom (for income tax purposes).  This is to prevent an individual electing to be treated as UK domiciled for IHT purposes to benefit from the uncapped limit on transfers from his or her spouse/civil partner, and then immediately reverting to non-UK domiciled status to restore beneficial IHT treatment of non-UK assets. 

An election will cease to have effect if the electing person is resident outside the United Kingdom (for the purposes of income tax) for more than four full consecutive tax years, beginning at any time after the election is made.  In such cases, the election will cease to have effect from the end of the fourth full tax year of non-residence.

Advantages of Electing to be UK Domiciled

Where an election is made, gifts made by a UK domiciled spouse/civil partner to his or her non-UK domiciled spouse/civil partner will be free from UK IHT.

Electing spouses making either a lifetime or death election will be able to choose a date the election applies from, going back up to a maximum of seven years (but no earlier than 6 April 2013).  This means that lifetime gifts made within the seven years before death will benefit from the full spouse exemption even if no election was in place at the time of the gifts.  Where no date is specified, a lifetime election has effect on the date it is made and a death election will be treated as taking effect immediately before the death of the UK domiciled spouse.

An election by a non-UK domiciliary for UK domicile status will only affect an individual’s treatment for IHT purposes.  It will not, for example, affect their eligibility for remittance basis treatment in relation to income tax.

Disadvantages of Electing to be UK Domiciled

The non-UK domiciled spouse’s subsequent disposals and worldwide assets will be brought within the UK IHT net (subject to their own nil rate band and any other reliefs), until the election ceases to have effect.  To the extent the nil rate band of the spouse/civil partner making the election has been used up, transfers to any beneficiary other than the UK domiciled spouse/civil partner will be liable for UK IHT.  If no election is made, only the UK assets of the non-UK domiciled spouse/civil partner will be subject to UK IHT.

IHT Exempt Amount

All individuals, irrespective of their domicile status, benefit from an IHT exempt amount in the United Kingdom, currently set at £325,000 (IHT nil rate band) and frozen until 2017/2018.

One other notable change that came into force on 6 April 2013 relates to the IHT exempt amount for transfers to non-UK domiciled spouses/civil partners.  For transfers of value made by UK domiciled individuals to non-UK domiciled spouses/civil partners, the exempt amount has been increased from £55,000 (the lifetime cap) to a sum the value of the IHT nil rate band.  Going forward, this limit will be linked to any future changes to the IHT nil rate band. 

This means that, under the current rules and without considering other reliefs, if there is a mismatch of domiciles, assets worth £650,000 could pass IHT-free between the spouses/civil partners, assuming the full IHT nil rate band is available.

This increased IHT exempt limit may reduce the need for some non-UK domiciled individuals to consider making the lifetime or death election, particularly when combined with the benefit of escaping a worldwide charge to IHT.


This is an important development for mixed-domicile marriages and civil partnerships.  Relevant individuals should consider carefully both the short term and long term consequences of making an election to be treated as UK domiciled and much will depend on individual circumstances.

Making an election will be particularly appealing where a non-UK domiciled individual expects to receive large gifts from their UK domiciled spouse/civil partner during their lifetime and/or (more likely) a large inheritance on death, as the gifts would be wholly exempt from IHT on the first death.

An election may, however, be detrimental in the long term if a non-UK domiciled spouse/civil partner has significant overseas wealth in their own right, because the election would bring their overseas assets into charge for IHT in the United Kingdom.  If the recipient spouse leaves the United Kingdom for good after the death of the UK-domiciled spouse, then the charge on the recipient spouse’s estate will fall out after four tax years away from the United Kingdom.