If you are a UK expat living abroad, it is important to understand how inheritance tax (IHT) may impact your estate upon your death. Inheritance tax is a tax levied on the value of an individual’s estate at the time of their death, including any gifts made in the seven years prior to their death. It is important to note that IHT is not limited to UK residents, and may apply to UK expats as well.

UK expats may be subject to inheritance tax in the UK if they meet certain criteria. The first factor to consider is domicile. Domicile is a legal term that refers to an individual’s permanent home, and it is important because it determines an individual’s liability to UK inheritance tax. In general, an individual is considered to be domiciled in the UK if they were born in the UK, their father was born in the UK, have a permanent home in the UK, or have lived in the UK for the majority of their life. However, even if you are not domiciled in the UK, you may still be subject to inheritance tax if you own assets in the UK.

If you are domiciled in the UK, your worldwide assets are subject to inheritance tax. If you are not domiciled in the UK but own assets in the UK, those assets may be subject to inheritance tax if they exceed the IHT threshold. The IHT threshold, also known as the nil rate band, is currently £325,000. This means that if the value of your estate (including any gifts made in the seven years prior to your death) is less than £325,000, no IHT will be due. However, if the value of your estate exceeds this threshold, IHT will be charged at a rate of 40% on the amount over the threshold. So even if you merely own assets in the UK or plan to live there and / or own assets there in the future you may also beexposed to UK IHT, and therefore, need to plan.

‍

There are several steps you can take to reduce your potential liability to UK inheritance tax. The first step is to review your estate planning and ensure that your assets are distributed in a tax-efficient manner.

‍

There are many simple and common-sense measures that can be incorporated into many families' estate planning with little cost or fuss that can mitigate some vagaries and liabilities straight away, but which are often overlooked. In particular there is one planning tool we see all too often over looked by families in succession planning, which can have potentially massive benefits in mitigating UK IHT and structuring assets for estate planning more effectively.

‍

Our seasoned team of wealth management professionals are ideally placed to support you in reviewing your current estate planning or help you make a start and offer solutions to minimize your tax liabilities. To learn more simply complete our request more information form and a member of the team will be in contact shortly.