Can I use UK gilts (FOTRA) to avoid Inheritance Tax after moving abroad?

I’m emigrating and will become tax resident abroad, but under the current rules I’ll still be liable for UK Inheritance Tax for 10 years after I leave. I want to shelter most of my money in FOTRA gilts (UK government bonds that are Free of Tax for Residents Abroad) to protect my non-UK spouse from an IHT bill on my death. The big DIY platforms don’t seem to know anything about this. Can you help, or point me in the right direction?

Thanks for your question.

This is a real way of mitigating IHT. Long-term residents have a tail of 10 years from moving out of the UK after which they are still liable to UK IHT on their whole estate on death. But if you take all your money and lend it to the UK government in the form of gilts (there are some limits as to which securities count; be careful!) you get an immediate exemption from IHT. You need to become resident in another country and therefore need to pass the complex threshold of non-residency set out in UK legislation (another potential landmine to step on). It’s also worth highlighting that the precise UK residency status of your spouse matters to whether IHT is liable at all between you on your death.

I would be very surprised if the telephone team at a direct-to-consumer platform knew anything about this. It’s not a well-used IHT exemption and it’s not their job to make sure you successfully achieve the effect you want. Depending on the size of your estate you could potentially be making very large tax savings for your estate. You will need to liquidate assets to buy any gilts anyway. I would suggest you spend a few thousand pounds on some advice from a specialist tax firm. It may also be worth getting an investment manager to run the gilt portfolio; there are managers who will do this for you relatively cheaply.

Finally, I must give credit where it’s due. Conservative Chancellor Jeremy Hunt announced the end of the ‘Non-Dom’ regime in 2024. Although the subsequent Labour government enthusiastically enacted the policy and made some alterations, the 10-year tail for IHT was in Jeremy Hunt’s initial proposal document from March 2024.