Inheritance Tax



Overseas Aspects of Inheritance Tax

An individual’s DOMICILE is crucial when considering overseas aspects of INHERITANCE TAX.

The Impact of UK Domicile Status for Inheritance Tax

UK DOMICILED or DEEMED UK DOMICILEDNON – UK DOMICILED
INHERITANCE TAX CHARGED ON TRANSFERS OF WORLDWIDE ASSETSINHERITANCE TAX CHARGED ON TRANSFER OF UK ASSETS ONLY

A NON-UK DOMICILED individual still has the standard NIL RATE BAND (currently £325,000) and when they are non-domiciled in the UK, but their main residence is in the UK the RESIDENCE NIL-RATE BAND (RNRB) of up to £175,000 may also be available.


Overseas Aspects of Inheritance Tax (IHT): UK Assets – Non-UK Domiciled

Understanding what are UK ASSETS FOR NON-UK DOMICILED individuals depends on the location of the assets.


Overseas Aspects of Inheritance Tax (IHT): Mixed Domicile Couples

MIXED-DOMICILE COUPLES have one spouse who is UK-DOMICILED and the other spouse who is NON-UK DOMICILED.

The INHERITANCE TAX SPOUSE EXEMPTION for transfers from a UK DOMICILED individual to a NON-UK DOMICILED individual is limited to £325,000. Remember that there is NO LIMIT to the EXEMPT AMOUNT for IHT purposes between UK DOMICILED married couples and civil partners.

NOTE: This INHERITANCE TAX SPOUSE EXEMPTION is not to be confused with the Nil Rate Band (NRB).

An election can be made by the NON-UK DOMICILED individual to be treated as UK DOMICILED for inheritance tax purposes. This increases the EXEMPT AMOUNT from £325,000 to UNLIMITED.

This election can be made with TWO YEARS of the death of either spouse and can specify to take effect from any date with SEVEN YEARS prior to the deceased’s death.

The election is IRREVOCABLE whilst the electing spouse is UK RESIDENT.

Consideration is needed before making this election of future INHERITANCE TAX that will become liable due to UK DOMICILED STATUS.