There is a particular kind of dread that settles over British expats when they first read the words "long-term resident" in the context of UK Inheritance Tax. It is the dread of a trap that was set years before they knew it existed — by decades of paying UK taxes, by the years of ordinary life lived in a country before the idea of leaving ever occurred to them.
Since April 2025, the UK replaced domicile with a residency-based test for IHT purposes. The change was designed to be more objective, more predictable. In some ways it is. In other ways, it has created new complexity for exactly the people — British expats who left years ago — it might have been expected to benefit.
Here is what you actually need to know if you are a UK national living in Malta and thinking seriously about estate planning.
The New Long-Term Residency Test
From April 2025, you are a long-term UK resident — and therefore subject to UK IHT on your worldwide estate — if you meet either of these conditions:
- You have been a UK tax resident for 10 out of the previous 20 tax years
- You have been a UK tax resident for 10 consecutive years at any point before the current tax year
UK tax residence is determined by the Statutory Residence Test (SRT). As a general rule: spend 183+ days in the UK in a tax year and you are resident for that year. Below that, specific automatic UK tests, automatic overseas tests, and "sufficient ties" tests apply — making professional assessment essential for anyone with complex arrangements.
The critical implication: even if you left the UK years ago, if you accumulated 10 qualifying years of UK residence before leaving, your worldwide estate — including your Maltese property, Maltese bank accounts, and investments held anywhere in the world — remains potentially within the UK IHT net.
What Is In Scope
If you are deemed a long-term UK resident, your worldwide estate is subject to UK IHT. This explicitly includes Maltese assets: bank accounts, investment portfolios, life insurance proceeds, and property. From 2027, unused portions of UK-registered pensions will also fall within the IHT net under proposed (and at time of writing, still contested) reforms.
If you have shed long-term UK residency — you have not been UK tax resident for 10 out of the last 20 years — your IHT exposure is limited to UK-sited assets only. Your Maltese property, Maltese bank accounts, and foreign investments sit outside the UK tax net entirely.
The Rates and Thresholds
| Allowance | Amount (2025/26) |
|---|---|
| Nil-rate band | £325,000 per person |
| Residence nil-rate band (passing home to direct descendants) | Up to £175,000 per person |
| Spouse/civil partner transfer | Unused nil-rate band fully transferable |
| Standard IHT rate | 40% on estate value above threshold |
| Charitable legacy reduction | 36% if 10%+ of net estate left to charity |
| Annual gift allowance | £3,000 per year (exempt) |
| Seven-year rule | Gifts made 7+ years before death fall outside the IHT estate |
Malta's Capital Transfer Duty
Malta has no inheritance tax as such. What it has is a Capital Transfer Duty (CTD) — essentially stamp duty — on inherited assets, primarily property and company shares.
The standard rate on inherited real estate is 5% of market value. Key exemptions that most families qualify for:
- Surviving spouse inheriting the deceased's share of the primary home: no CTD
- Children inheriting a parent's primary residence: exempt if the causa mortis declaration is filed within one year of death
- Inherited company shares: 2% CTD (5% if the company primarily holds real estate)
The one-year deadline for the causa mortis declaration is not a technicality. Missing it triggers a 4% annual penalty and forfeits the exemption. This requires a notary and proactive family action during what is already a difficult period — plan ahead and make sure your family knows the process.
Preventing Double Taxation
The UK does not have a specific IHT treaty with Malta. What it does have is unilateral credit relief: tax paid overseas on assets within the UK IHT scope can be credited against UK IHT, limited to the UK tax due on those specific assets. If Malta charges CTD on a Maltese property that also falls within UK IHT, the CTD paid reduces the UK IHT due on that property.
In practice, genuine double taxation is uncommon — particularly for expats who have shed UK long-term residency, in which case each country taxes only assets within its own borders. The overlap tends to arise specifically for people in the transitional zone: recently departed from the UK and not yet outside the 10-year window.
Key Planning Considerations
Count your years carefully. The most important variable is your total UK residency period in the 20 years preceding any IHT event. If you are approaching or have recently left the 10-year threshold, the timing of further UK visits matters more than you might think.
Use lifetime gifts strategically. Gifts made more than seven years before death fall outside the UK IHT estate. Systematic gifting within annual allowances (£3,000/year, plus small gifts allowances) reduces the estate over time.
Life insurance written in trust is a standard UK expat tool. Proceeds from a life insurance policy held in trust sit outside the IHT estate by virtue of the trust structure, providing liquidity to cover an expected IHT liability without the proceeds themselves increasing the estate.
Maintain valid wills in both jurisdictions. Maltese succession law includes forced heirship rules — close family members are entitled to fixed shares of any estate. To prevent Maltese law from overriding UK intentions, maintain current, professionally drafted wills in both countries, ideally coordinated with legal advisers in each jurisdiction.