Residency Rules, Digital Legacies, and HMRC Clampdowns – What Estate Planners Need to Know

The estate planning landscape is shifting. In the space of just a few months, a trio of significant developments has emerged: a fundamental rethinking of the UK’s tax residence rules for inheritance tax purposes, a surge in HMRC enforcement activity specifically targeting estates, and the prospect of wills becoming truly digital.

For anyone looking to get their estate planning affairs in order, whether for the first time or as part of a regular review, staying on top of these changes really matters.

Residency-based Inheritance Tax: a new era has begun

One of the most headline-grabbing announcements in the Spring 2024 Budget was the decision to scrap the current inheritance tax (IHT) domicile regime in favour of a residence-based test, which was introduced in April 2025.

Under the new rules:

• Individuals who have been UK tax resident for at least 10 of the previous 20 years are now subject to IHT on their worldwide assets.
• Once someone leaves the UK, they will continue to be subject to UK IHT on their worldwide estate for a further 10 years. This is known as a “tail” provision.
• Non-UK assets held in settlor-interested excluded property trusts will lose their exempt status if the settlor is UK resident under the new rules.

If you or your family have international ties: for example, you have worked overseas, you own property abroad, or you have set up offshore trusts, it is probably time for a review. The rules are changing, and strategies that worked before may no longer be effective.

Even returning to the UK temporarily: for example, to care for an elderly relative or spend time with grandchildren, could be enough to bring your entire worldwide estate within the scope of UK inheritance tax. Understanding your residence position is now key.

HMRC tightens its grip: more investigations, higher penalties

HMRC has become much more pro-active in checking whether inheritance tax has been correctly calculated. In 2024-25 alone, it recovered over £340m in underpaid tax. That’s a clear sign they’re paying close attention.

HMRC are particularly focused on:

• Property valuations, especially where a home is sold to a family member, or if the valuation seems low.
• Late reporting – even if no tax is ultimately due, delays in reporting can result in penalties being incurred.
• Interest on late payment – this is currently charged at 4% over base rate, so the cost of getting it wrong can really add up.

If you are currently acting as an Executor, or you expect to be one in the future, it is important to seek professional advice early.

A solid paper trail and accurate figures can make all the difference if HMRC ask questions down the line.

We have also seen an increase in letters from HMRC arriving months (or even years) after a grant of probate is issued, often as a result of “data matching” with other government departments. A cautious, well-documented approach is no longer just best practice; it is essential.

Wills go digital? A glimpse of the future

The Law Commission’s recent proposals suggest that we are moving towards a future where wills can be made and stored digitally. While the rules haven’t changed yet, we could soon see:

• Electronic wills that are legally recognised.
• Clearer guidance around capacity and undue influence in the online environment.
• More flexible rules around how wills are witnessed and signed.

This could be great news for busy professionals, younger individuals, and those living overseas, especially if it becomes easier to make a will without needing to print, sign and post documents. But there will need to be strong protections in place too, to guard against fraud or coercion.

It is also worth bearing in mind that digital access isn’t for everyone. Many people, particularly older clients or those with additional needs, may still prefer traditional paper wills. Whatever route the law eventually takes, the most important thing is that your wishes are recorded clearly and safely.

What should you do now?

Whether your estate planning affairs are simple or complex, this is a good moment to take stock. We recommend:

• Reviewing your will to make sure it still reflects your wishes, especially if your circumstances have changed.
• Checking your Lasting Powers of Attorney are up to date and registered, so someone you trust can step in if needed.
• Getting professional valuations for any property or significant assets.
• Discussing overseas connections or trusts with your adviser so that any exposure to inheritance tax is understood and managed.
• Talking to your executors so they understand what will be expected of them and know where to find the key documents.

These changes can feel technical, but their impact is very real. A bit of forward planning now can give you and your family peace of mind, and potentially save a great deal of stress (and cost) in the future.

How Elite Law Solicitors can help

Jane Whitfield is a senior solicitor specialising in trusts, wills and estate planning. She heads up the Private Wealth team at Elite Law Solicitors and has over 20 years’ experience helping clients plan for a secure future.

If you would like to speak to Jane or another member of our Private Wealth team about any estate planning matters, we would be delighted to help. At Elite Law Solicitors, we are here to help you plan with confidence and gain peace of mind.

Book your free initial consultation today by calling 0800 086 2929, by emailing us at info@elitelawsolicitors.co.uk, or by completing our Free Online Enquiry Form.