A recent report from Henley & Partners, widely reported across the UK press, predicts a major exodus of millionaires from the UK in 2025. Many have left the UK either since, or in anticipation of, the non-dom rule changes announced last April. This was when Long-Term Resident (LTR) rules were introduced, resulting in more individuals having their world-wide assets liable to UK inheritance tax (IHT) at 40 per cent.
The prime central London property market seems to have been impacted considerably, with LonRes reporting 35.8 per cent fewer transactions in May 2025 for high-end properties compared with 2024 and 33.5 per cent fewer than the pre-pandemic average. It has even been reported that Chancellor Rachel Reeves is considering reversing or softening her changes, although many argue that the damage has been done. Reports suggest many non-doms are leaving for more tax-friendly locations such as the United Arab Emirates, or European countries like Italy or Switzerland.
But how can those who want to stay, at least for now, protect themselves from their IHT liabilities? And not just them – with further changes to the rules impacting small business owners and farmers from April 2026, and IHT being levied on pensions from April 2027, those domiciled in the UK may also wish to take a look at their own IHT planning. We asked Rob May and Henry Wood, life insurance advisers at SPF, what they are advising their clients.
Rob explains: “Non-dom clients are looking for longer-term solutions to buy them time to stay in the UK and reduce their tax exposure in the meantime.” Henry adds: “Many have children in school and don’t want to disrupt them, but they do intend to leave at some point.”
Another issue for long-term residents leaving the UK is that they have an ‘IHT tail’ of between three and ten years, depending on the length of time they have been a resident, during which worldwide assets remain within the scope of UK IHT. Rob adds: “A non-dom may have say, a ten-year-old child and wishes to stay until they have completed their schooling, so this could be a 10 to 15-year time horizon when they are UK resident and then potentially a ten-year tail from an IHT perspective where tax still applies, so they can protect that period of time via insurances.”
How Inheritance Tax (IHT) works
IHT is charged on the value of your estate when you die. If you leave everything to a spouse or civil partner, there is no IHT to pay. If you leave it to someone else, the first £325,000 of the value is free from tax; if you pass it onto a direct descendant, such as a child, you may get another £175,000 allowance on top if you have a main residence (though this allowance is reduced where the net estate is over £2,000,000). The £325,000 IHT allowance hasn’t changed since 2009. If you have a multi-million pound estate and are facing a 40 per cent tax bill, which has to be paid within six months of death arising, that can create real issues.
How life insurance can help with Inheritance Tax planning
While you can’t necessarily avoid an IHT bill, life insurance can provide a guaranteed tax-free lump sum on death (or second death) which can be used to settle it, protecting the inheritance for the family. The policy holder pays either monthly or annual premiums during their lifetime; after they die, the policy pays out to a beneficiary. If you have the right level of cover, there should be no need for your beneficiaries to sell any assets, such as property, to settle the IHT bill after you die. As a general guide, £1m of life cover will protect estates with a net value of £2.5m, ignoring any reliefs or allowances.
Planning ahead and reviewing cover
While IHT insurance solutions can be implemented after a client has left the UK, there is a much broader range of products available if they arrange cover beforehand. Henry explains: “Some of those who have left the UK weren’t aware that life insurance was an option and then it’s too late to arrange. It is about making sure people are aware of the options open to them at the time.”
Insurance can be arranged to cover the tax exposure up to a broad maximum of £150 million but the older you get, the harder it is to get cover. “Once you reach the age of 80 it gets more challenging and if you combine the client’s age and potential health issues, it might not be possible to insure them,” explains Rob. This is another reason why it’s worth consulting a whole-of-market broker such as SPF Private Clients as circumstances differ considerably –advice from someone who knows what they are doing is crucial.
Rob adds: “The benefit of working with us is that we aren’t just life insurance brokers, we are financial advisers and have an awareness and understanding of IHT more broadly, so we can establish the right amount of cover and a solution that dovetails with the client’s other financial planning.”
They also periodically revisit a client’s insurance policies to ensure the level of cover remains suitable. Henry explains: “We might do this every five years, as circumstances change – clients can inherit wealth or do incredibly well with their investments, which often means that more cover is required.”
Life insurance – cheaper today than tomorrow
With further changes on the way as to how farmers and family businesses are liable for IHT from next April, it may seem premature to act now but Rob disagrees: “All this tinkering to the rules creates inertia for planning purposes but my advice is to plan for what we think is going to happen. Get insurance in place now; if the situation changes and tax exposure is less than thought, you will pay less of a premium or can even cancel the policy. Alternatively, if you do nothing and wait until next April, who knows what will happen with your health and insurability? You might have to pay a much higher premium or not be able to get insurance at all. It is far better to put something in place as a backstop and if we need to revisit it we can.”
Henry adds that life insurance is typically cheaper today than tomorrow because the cost increases as you age. Also, one of its advantages is its flexibility so it is easy to reduce or cancel policies: “There is no charge for doing so. If you already have life cover, it is also possible to bolt a new policy on top but it’s worth revisiting existing cover first: pricing may be more competitive now, especially if there were medical concerns at the time the policy commenced. Exploring a new policy may therefore lead to better underwriting terms and therefore more competitive premiums.
Contact SPF if you want to discuss your circumstances and see how we can help.
Please note the above content is based on our current understanding of tax legislation.
