UK Inheritance Tax for Indians: What British Indians Need to Know in 2026

If you are an Indian-born person living in the UK and have built wealth in both the UK and India, a major change to UK inheritance tax could affect your family.

Since 6 April 2025, the UK has moved away from its traditional inheritance-tax domicile rules and introduced a long-term UK residence test. Broadly, someone who has been UK resident for at least 10 of the previous 20 tax years can fall within UK Inheritance Tax on their worldwide assets.

But there is an important twist that many British Indians may not realise: the old UK-India estate-duty treaty still matters in certain circumstances. HMRC specifically says that, for the India convention, the relevant question remains a person's common-law domicile, and where that domicile is India, the UK's taxing rights can be restricted to UK assets.

UK Inheritance Tax for Indians UK IHT 2025/2026 rules Non-dom changes 2025 UK Long-term resident test IHT UK India estate duty treaty Indian assets UK inheritance tax

So is every British Indian with Indian property suddenly facing 40% UK IHT on everything?

Not necessarily.

The answer can depend on residence history, the nature and location of assets, common-law domicile and the operation of the treaty. This is why getting the position right is more complicated than simply counting how many years you have lived in Britain.

Important: This article is for general information only and is not personal tax, legal or financial advice. Cross-border inheritance-tax planning can be highly fact-specific.

Table of Contents

Sr#	Headings
1	What Changed to UK Inheritance Tax in April 2025?
2	What Does “Long-Term UK Resident” Mean?
3	Does UK IHT Now Apply to Indian Assets?
4	What Happens When You Leave the UK?
5	The UK-India Estate Duty Treaty: The Important Exception
6	Why Indian Domicile Still Matters
7	What About UK Property?
8	Why “British Indian” Does Not Automatically Mean UK Domicile
9	Why Proving Domicile Can Be Difficult
10	A Simple Example of How the Rules Could Work
11	What Assets Should Families Review?
12	Common Mistakes British Indians Should Avoid
13	What Should You Do Before Assuming the Worst?
14	Conclusion
15	Frequently Asked Questions

1. What Changed to UK Inheritance Tax in April 2025?

For many years, the scope of UK Inheritance Tax was closely linked to the concept of domicile.

That changed from 6 April 2025.

The government replaced the previous domicile-based approach for determining whether a person's overseas assets fall within UK IHT with a long-term UK residence test. In broad terms, someone who has been UK resident for at least 10 out of the previous 20 tax years can become a long-term UK resident for IHT purposes.

Why does this matter to an Indian family?

Imagine your wealth as a collection of boxes. One box might contain your Birmingham home, another your UK pension or investments, while another contains a house in Hyderabad, agricultural land in India or Indian investments.

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Under the new rules, the fact that an asset is sitting outside Britain does not automatically keep it outside UK IHTif you are a long-term UK resident.

That is the fundamental change.

2. What Does “Long-Term UK Resident” Mean?

The basic test is relatively straightforward.

From 6 April 2025, an individual can be a long-term UK resident where they have been UK resident for at least 10 of the previous 20 tax years immediately before the relevant chargeable event, such as death.

This means that someone who has lived in Britain for many years cannot necessarily say:

“My assets are in India, so UK inheritance tax cannot affect them.”

That assumption could be wrong.

However, residence history needs to be examined carefully. It is not simply a question of whether you have physically lived in the UK for ten calendar years.

Tax years, residence status and the precise timing of events matter.

There are also transitional rules for certain people who were non-UK resident in 2025–26.

So if you have a complicated UK/India history, don't rely on a simple calculation made from memory.

3. Does UK IHT Now Apply to Indian Assets?

Potentially, yes.

HMRC states that from 6 April 2025, a long-term UK resident can have their non-UK assets brought within the scope of UK Inheritance Tax.

That can include assets such as:

Property in India
Indian investment portfolios
Shares and securities
Bank accounts
Business interests
Other overseas property depending on its legal and tax character.

This is particularly relevant for British Indians who have spent decades building assets in India while living and working in the UK.

However, there is a crucial second question:

Does the UK-India estate-duty convention change the result?

That is where things become much more interesting.

4. What Happens When You Leave the UK?

Leaving Britain does not necessarily make worldwide IHT exposure disappear immediately.

The new rules include a 3-to-10-year “tail” for people who leave the UK after becoming long-term UK residents.

The length of that period depends broadly on how many years the individual had been UK resident. For example, HMRC's guidance indicates that someone with 10 to 13 years of UK residence can remain within scope for three tax years, while the period increases with additional years of residence, reaching up to ten years.

This is important for anyone thinking:

“I'll simply move back to India before I die.”

It is not necessarily that simple.

The timing of departure, previous UK residence and subsequent residence history can all matter.

In other words, moving country is not like flicking a light switch. The tax consequences can continue for years.

5. The UK-India Estate Duty Treaty: The Important Exception

Now we come to the part that could be particularly important for some Indian families.

The UK and India entered into the 1956 Double Taxation Relief (Estate Duty) Agreement. Although India abolished inheritance tax/estate duty in 1985, HMRC confirms that the convention remains relevant to UK Inheritance Tax in appropriate cases.

And HMRC's own Inheritance Tax Manual contains a striking statement about the India convention:

Where the person's common-law domicile is India, the UK's taxing rights can be restricted to UK assets held in the estate.

That is potentially a very significant distinction.

It means the new 2025 residence rules do not necessarily tell the whole story for every British Indian with Indian assets.

The treaty can still have a role because it operates according to common-law domicile, rather than simply adopting the new long-term residence test. HMRC expressly confirms that pre-1975 conventions such as the India convention continue to operate by reference to common-law domicile.

6. Why Indian Domicile Still Matters

This is where the situation can become confusing.

The UK broadly moved away from domicile as the main test for worldwide IHT exposure in 2025.

Yet domicile did not disappear from the tax landscape altogether.

HMRC specifically says that domicile remains relevant where the common-law concept arises under certain Double Taxation Conventions.

For the UK-India convention, the question can therefore become:

Was the deceased domiciled in India or Great Britain under the relevant common-law principles at the time of death?

The treaty itself says that domicile is determined according to the law in force in the relevant territory.

This distinction is extremely important.

Being:

Indian-born,
an Indian citizen,
a British citizen,
an OCI holder,
an NRI,
or someone who owns a house in India

does not, by itself, answer the common-law domicile question.

Domicile is a much more nuanced legal concept.

7. What About UK Property?

This is one area where people should be especially careful.

Even where the UK-India treaty restricts the UK's taxing rights in relation to assets outside the UK, UK-situated assets can remain within UK IHT.

The treaty's provisions specifically preserve UK taxing rights over certain UK property. For example, Article III states that where a person is domiciled in India, Great Britain is not prevented from imposing duty on property passing under a disposition or devolution regulated by UK law.

The treaty's situs rules also state that rights or interests in immovable property are situated where the property itself is located.

So if you own a house in London, Manchester, Birmingham or elsewhere in the UK, you should not assume that an Indian domicile claim makes the UK property disappear from the IHT calculation.

This is one reason a blanket statement such as “the treaty protects British Indians from UK inheritance tax” can be misleading.

The more accurate statement is:

The treaty may restrict UK IHT on certain non-UK assets where its conditions are satisfied, but UK-situated property can remain taxable.

8. Why “British Indian” Does Not Automatically Mean UK Domicile

A person's background is only one piece of the puzzle.

Someone could have been born in India but have established a UK domicile under common-law principles.

Another person could have lived in Britain for decades while retaining an Indian domicile, depending on their individual circumstances and intentions.

That is why you should be very cautious about online claims that say:

“If you were born in India, you're protected.”

or:

“If you're a British citizen, you're automatically UK domiciled.”

Neither shortcut is safe.

The relevant legal analysis can involve your history, permanent home, intentions, family circumstances and other evidence.

And importantly, domicile for treaty purposes is not simply the same thing as tax residence.

You can therefore have a situation where:

UK residence for IHT purposes + Indian common-law domicile for treaty purposes

need to be considered together.

That combination is precisely why specialist advice can be valuable.

9. Why Proving Domicile Can Be Difficult

This is perhaps the most underestimated issue.

It is one thing to say:

“I consider India my permanent home.”

It is another thing to establish that position convincingly when HMRC, executors or advisers examine the evidence after death.

Think of domicile like a legal jigsaw puzzle. No single piece necessarily proves the entire picture.

Evidence might include matters such as:

Where you and your family have lived
Where you consider your permanent home to be
Your long-term plans
Property ownership
Family and personal connections
Where you intend ultimately to settle
Your movements between countries
Wills and estate planning documents
Statements made in official or legal documents
Business and financial connections
Your actions over many years.

A poorly documented position can therefore create uncertainty.

And this is why “I am Indian, therefore I am Indian-domiciled” is not a sufficient strategy.

If a treaty claim is potentially worth a substantial amount of tax, it should be established carefully rather than assumed.

10. A Simple Example of How the Rules Could Work

Consider Raj, an Indian-born businessman who has lived in the UK for 15 years.

He owns:

A UK home worth £900,000
UK investments worth £500,000
An apartment in India worth £700,000
Indian investments worth £600,000.

On the face of the post-April 2025 rules, Raj's long UK residence could potentially bring his overseas assets into UK IHT.

But suppose Raj's advisers establish that, under the relevant common-law principles, he remains domiciled in India for the purposes of the UK-India estate-duty convention.

HMRC's published guidance says that, in such a case, the UK's taxing rights under the convention can be restricted to the UK assets in the estate.

That could produce a dramatically different result from simply assuming that all of Raj's worldwide assets are subject to UK IHT.

However, this is only an illustration.

The actual result would depend on Raj's circumstances, the precise assets involved, the operation of the treaty and the relevant IHT rules.

11. What Assets Should Families Review?

If you are a British Indian with significant wealth in both countries, consider making a complete asset map.

UK assets

Review:

UK residential property
Buy-to-let property
Bank accounts
ISAs and investments
Shares
Business interests
Other UK-situated property.

Indian assets

Also identify:

Indian residential property
Agricultural or other land
Bank deposits
Shares
Mutual funds
Family businesses
Partnership interests
Other investments.

Then ask a second question:

What exactly is the legal nature and situs of each asset?

This matters because the 1956 convention contains detailed situs rules for different categories of property. For example, immovable property is generally situated where it is located, while company shares are treated according to specific rules concerning the company's incorporation.

So a simple “UK versus India” spreadsheet may not be enough.

12. Common Mistakes British Indians Should Avoid

Mistake 1: Assuming Indian assets are automatically outside UK IHT

The post-2025 rules can bring overseas assets into the IHT net for long-term UK residents.

Mistake 2: Assuming the treaty automatically protects everything

It doesn't.

The treaty has specific provisions and conditions. UK assets can remain taxable, and different types of property have specific situs rules.

Mistake 3: Confusing citizenship with domicile

A British passport does not answer the common-law domicile question.

Nor does an Indian passport automatically establish Indian domicile for treaty purposes.

Mistake 4: Ignoring the residence history

The 10-out-of-20-year test is central to the post-April 2025 rules.

Mistake 5: Assuming leaving Britain immediately solves the problem

The new rules can keep a former long-term UK resident within the worldwide IHT regime for 3 to 10 years, depending on their circumstances.

Mistake 6: Waiting until a death occurs

Trying to reconstruct someone's domicile after death can be considerably harder than documenting their position while they are alive.

13. What Should You Do Before Assuming the Worst?

If you have substantial assets in India and the UK, don't begin with the assumption that you owe 40% UK IHT on everything.

Instead, ask a specialist to examine both sides of the equation.

A sensible review could consider:

Your UK residence history
Whether you are a long-term UK resident
Your common-law domicile
Whether the UK-India convention applies
The location and legal nature of your assets
UK property and other UK-situs assets
Your wills and estate structure
Any trusts or lifetime transfers
Your plans to remain in, or leave, the UK
Evidence supporting your domicile position.

HMRC itself confirms that the UK-India convention continues to operate for IHT and that its operation depends on common-law domicile.

So this is not simply an internet rumour or a historical treaty that has become irrelevant.

It is a real issue worth raising with a suitably qualified UK/India tax adviser.

If you are looking for specialist NRI and UK IHT advice, TrustedDesi.com is one place to explore professional support. Any adviser should review your individual circumstances rather than promise a particular tax outcome.

Conclusion

The headline story about UK inheritance tax for Indians is more complicated than “from April 2025, Britain taxes everything you own worldwide.”

The new long-term UK residence rules can certainly bring overseas assets into UK IHT for people who meet the residence test.

But the 1956 UK-India estate-duty convention has not simply disappeared. HMRC expressly recognises that the India convention continues to operate by reference to common-law domicile and says that, where the individual's common-law domicile is India, UK taxing rights can be restricted to UK assets.

At the same time, UK-situated assets—particularly UK property—cannot simply be assumed to be protected.

The real question is therefore not just “How many years have I lived in Britain?”

It is:

“How do the new UK residence rules, my common-law domicile, the UK-India treaty and the situs of my assets interact in my particular circumstances?”

That is a question worth answering before your family needs to deal with your estate.

Frequently Asked Questions

1. Does UK inheritance tax apply to Indian assets owned by Indians living in the UK?

It can. From 6 April 2025, long-term UK residents can have non-UK assets within the scope of UK IHT. The basic long-term residence test is 10 UK-resident tax years out of the previous 20.

However, the UK-India estate-duty convention can affect the result where its requirements are met. HMRC states that where a person's common-law domicile is India, the UK's taxing rights can be restricted to UK assets.

2. Does being Indian-born automatically mean I am domiciled in India?

No. Birthplace, nationality and citizenship are not enough to determine common-law domicile.

The question requires a detailed assessment of the person's circumstances and intentions. Because the treaty relies on common-law domicile, this is an area where specialist advice can be particularly important.

3. Can the UK-India treaty protect my UK property from inheritance tax?

You should not assume so.

The treaty contains specific rules for determining where different assets are situated. It expressly treats interests in immovable property as situated where that property is located.

Consequently, UK property can remain relevant to UK IHT even where the treaty restricts UK taxing rights over certain overseas assets.

4. If I leave the UK and return to India, will my worldwide assets immediately leave the UK IHT net?

Not necessarily. Someone who has become a long-term UK resident may remain within the relevant IHT rules for a period after leaving the UK. Depending on their previous residence history, that period can range from 3 to 10 years.

The precise calculation should therefore be checked before assuming that leaving Britain solves the problem.

5. Should British Indians review their wills and inheritance-tax arrangements after the 2025 changes?

Yes, particularly where there are significant assets in both countries.

A review should consider residence history, common-law domicile, the UK-India treaty, UK and Indian assets, property situs, trusts and existing wills.

The biggest mistake may be assuming that either “everything is taxable” or “the treaty protects everything.”

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