Inheritance Tax charges in the UK depend on domicile, i.e. where an individual has their permanent home, or intends to permanently settle.

UK domiciled individuals are liable to Inheritance Tax on their worldwide assets; individuals domiciled outside the UK are liable to Inheritance Tax on assets situated within the UK.

The nil rate band, above which Inheritance Tax is charged, is presently £325,000, and will remain so until at least 2018. Transfers of assets between spouses/civil partners, whether on death or in lifetime, are generally exempt from Inheritance Tax. However, where the spouse or civil partner to whom the assets are transferred is not UK domiciled, at present there is a cap on the value of the assets transferable free from Inheritance tax. That cap has been £55,000 for many years.

The Chancellor's budget announced that the cap will be increased to £325,000 and in future will be linked to changes in the nil rate band.

He further announced that under a new election regime, non-UK domiciled individuals married or in a civil partnership with a UK domiciled person can elect to be treated as UK domiciled for Inheritance Tax purposes. Electing individuals would benefit from uncapped Inheritance Tax exempt transfers from their spouse or civil partner, but they would then be subject to the same Inheritance Tax regime as UK domiciled individuals, in relation to their worldwide assets, subject to their own nil rate band.

Any such election will be irrevocable where the electing individual is resident in the UK, but will cease to have effect if they reside outside the UK for more than four full consecutive tax years.