Buy Borrow Die Strategy UK: How It Works and What HMRC Actually Does About It

The structure is straightforward: accumulate appreciating assets, borrow against them via a Lombard or securities-backed loan so the proceeds are not a taxable event, and pass the assets at death. In the US, a step-up in basis at death wipes the embedded gain. The UK abolished general capital gains tax uplift on death for most assets in 2008, which changes the calculus significantly but does not kill the strategy. What survives intact is the borrowing leg: loan proceeds are not income, not capital gains, and carry no SDLT or stamp duty implication, so a UK resident can still access liquidity from an appreciated portfolio without triggering CGT.

UK private banks including Coutts, Julius Baer London, and Lombard Odier's UK desk will lend 50 to 70 percent of a liquid portfolio's value at rates currently ranging from SONIA plus 0.75 percent to SONIA plus 2 percent depending on collateral quality and relationship size. The minimum portfolio to access these facilities in the UK is typically £2 million, though some Swiss banks operating in London will go lower for clients with broader relationships. The critical tax point is that HMRC does not treat the loan itself as a disposal or a deemed distribution, so an investor holding £5 million in an ISA-adjacent or GIA portfolio can draw £3 million in cash and owe nothing on the draw. The best Lombard loan providers for HNW borrowers covers the specific banks and term structures in detail.

UK inheritance tax at 40 percent applies to the net estate above the nil-rate band, and outstanding loans secured against assets do reduce the taxable estate because HMRC allows debts to be deducted. This creates a partial but meaningful offset: if a portfolio worth £10 million carries a £6 million Lombard loan, the net taxable estate from that asset is £4 million rather than £10 million. However, HMRC introduced rules under the Finance Act 2013 targeting loans used to acquire excluded property or assets qualifying for Business Relief, specifically to prevent artificial debt inflation of the estate. Any loan must have a genuine commercial purpose and a realistic expectation of repayment to be deductible.

A discretionary trust settled in the UK pays IHT entry charges of up to 20 percent and ten-year anniversary charges of up to 6 percent on the value above the nil-rate band, but assets can be lent back to beneficiaries or used as security for borrowings at the trustee level without triggering a capital disposal. Jersey and Guernsey trusts holding non-UK situs assets are a preferred structure for non-domiciled UK residents because those assets fall outside the UK IHT net entirely while the resident status persists. After the April 2025 deemed domicile reforms, long-term UK residents over 20 years lose this advantage, which makes the timing of trust settlement critical. The practical setup cost for a Jersey discretionary trust with a regulated corporate trustee runs from approximately £5,000 to £15,000 to establish, plus annual fees of £3,000 to £8,000.

HMRC's primary tools against artificial debt structures are the general anti-abuse rule (GAAR), the targeted anti-avoidance rule (TAAR) in the IHT loan deductibility provisions, and enquiry powers under Schedule 36 FA 2008. The structures that attract scrutiny are circular lending arrangements where the same funds travel from trust to beneficiary and back as a nominal loan, loans with no fixed repayment schedule or interest actually being paid, and loans used to acquire assets that then qualify for Business Property Relief. Structures that consistently survive are straightforward third-party bank Lombard loans against a genuine portfolio, where interest is actually paid and the collateral is commercially valued. The distinction is simple: real debt with a real lender passes; manufactured debt between connected parties fails.

The strategy delivers the most value to three specific profiles: non-domiciled UK residents with non-UK situs assets held offshore who can use the borrowing leg without the IHT exposure on the collateral; UK-domiciled individuals with very large estates where even a partial IHT reduction on the net debt calculation is worth tens of thousands annually; and entrepreneurs with shares qualifying for Business Property Relief who can borrow against those shares, since BPR-qualifying assets pass at zero IHT rate and the loan deductibility question becomes irrelevant. For a UK-domiciled individual with a £10 million liquid portfolio and no offshore structure, the strategy still delivers the core benefit of tax-free liquidity, even if the death leg requires more planning than the US equivalent.