Changes to the UK's inheritance tax (IHT) rules, set to bring most unused pension funds into the tax net from April, are prompting some Britons to consider relocating to countries without death duties. However, complex domicile regulations and asset location can limit the effectiveness of such moves.
Several popular expat destinations have abolished inheritance or estate taxes. Australia, for example, has had no inheritance tax since 1979, although capital gains and income taxes may apply to inherited assets. New Zealand also has no inheritance tax or stamp duty on asset transfers, but taxes can apply if an inherited property is sold with the intention of profit by the original owner. Singapore scrapped its estate duty in 2008, with exemptions provided for most estates.
Other countries that have eliminated inheritance or estate taxes include Slovakia (since 2004), Sweden (since 2005), Austria (since 2008), Hong Kong (since 2006), and Macau. Canada has no inheritance tax, though capital gains tax may apply to asset transfers after death. Mexico has no federal or state inheritance taxes, with inheritances generally exempt from income tax for residents, particularly when received from close family members. 
Despite these tax policies, Britons moving abroad may not escape UK IHT. The tax is primarily based on domicile, not residence. Individuals born and raised in the UK are typically considered UK-domiciled, even if they live overseas for many years. Acquiring a new domicile is possible, but prolonged residency in the UK can still lead to IHT charges. For instance, residing in the UK for 10 consecutive years within the last 20 tax years can result in being deemed UK-domiciled.
Furthermore, assets physically located within the UK may be subject to IHT regardless of the owner's domicile. Moving abroad while retaining UK property, for example, would not alter the tax implications for that asset. The potential for double taxation also exists in countries without a double-taxation agreement with the UK.
Experts suggest that exploring domestic legal options for asset protection may offer a more certain solution to mitigating UK inheritance tax compared to international relocation.