When someone is classed as being domiciled outside of the UK, Inheritance Tax will only be payable on their UK assets.

A person’s domicile is usually their home or permanent place of residence.

However some people may claim the place that their father was born as their domicile, or if their parents were unmarried, then the place of their mother’s birth.

Even if someone was born, educated and works in the UK, it is still possible for them to be a so-called ‘non-dom’, ie. not domiciled in the UK. There are rules requiring an annual remittance to be paid to HMRC each year from the seventh year of residency onwards, but by way of benefit non-doms can avoid paying tax on foreign income or gains, provided the money is not brought to the UK.

Inheritance Tax benefits for non-doms

This benefit also extends to UK Inheritance Tax liability. Property outside of the UK can be excluded when calculating Inheritance Tax liability if the deceased was classed as a non-dom at the time of their death. For those classed as domiciled in the UK, Inheritance Tax is payable on all assets, wherever in the world they may be situated.

Property excluded from Inheritance Tax payments

• Property situated overseas
• Property situated overseas and held in trust where the settlor was not domiciled in the UK
• Foreign currency bank accounts
• British government securities, national savings and War savings certificates

How to benefit from non-dom status

If you have non-dom status, then by setting up an excluded property trust such as a discretionary off-shore trust can protect your assets from UK Inheritance Tax.

This can be beneficial for those who may have lived in the UK for more than 15 out of the previous 20 years, as it will mean that they are considered as UK-domiciled.

By setting up an excluded property trust, assets will not attract Inheritance Tax even if the settlor then acquires UK domicile.

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When someone dies, their estate may be liable to pay an Inheritance Tax (IHT) bill. We look at how to tell whether IHT is due and how it is calculated.

The person responsible for dealing with someone’s affairs after their death, known as their personal representative, will need to work out whether any IHT is payable. Firstly, they will need to wind up the estate by collecting all the assets and valuing them. This will include sale or transfer of any property the deceased may have owned.

Any debts, bills and expenses can be subtracted from the money in the estate, then the amount remaining is added up, to calculate the net value. Any lifetime gifts made within the seven years before death should also be added to the total. A lifetime gift is a cash sum or valuable item given by the deceased from their savings or assets. There is an annual allowance of £3,000 per person giving the gift, so only sums over this threshold need to be added to the estate total. If the allowance isn’t used one year, it can be carried over to the next, but only to a maximum of £6,000.

If the net value of the estate is over £325,000, known as the nil rate band, then IHT will be payable at 40% on the amount over this level. An exemption is made (a transferable nil rate band) if the deceased is married and leaves everything to their spouse. In that case, when the spouse dies, a threshold of £650,000 will apply. A further exemption, (a residential nil rate band) is also available in some instances when a property is passed on to the deceased’s direct descendants.

Once the personal representative has worked out whether IHT is due, they will need to contact HM Revenue and Customs (HMRC) and make arrangements to agree and pay the tax bill. Payment will be due within six months from the end of the month in which the deceased died.

If sufficient funds are not available, HMRC may accept payment in instalments with interest being charged. Late payments will be subject to penalties plus interest.

IHT calculations can be complex, with the inclusion of lifetime gifts and application of transferable and nil rate bands, so when an estate is over the IHT threshold it can be helpful to seek professional advice. A tax and probate expert will be able to calculate the exact amount due and advise on methods of payment.

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To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

Charities are worried about the impact the new “stealth tax” could have on legacy giving.

The Government is facing condemnation after its plans to hike the cost of applying for probate were revealed. Under the proposals, some grieving relatives would need to pay death taxes of up to £6,000 to secure legal control over a deceased’s estate.

But in addition to families, charities could also feel the impact. In fact, according to The Institute of Legacy Management (ILM), charities will lose out by more than £10 million per year under the proposals.

In response, the Government has been asked to reconsider its stance. Speaking about this issue, the Chief Executive officer of ILM, said that it was deeply concerned by the proposed rise in probate fees.

At present, the current cost of securing probate is £215, or £155 for families who use a solicitor. However, if the Government gets its way, this cost could soar to £6,000 from April next year. This could have a devastating impact on those charities who are reliant on legacy gifts and significantly reduce their income.

At a time where many charities are struggling to meet increasing demand for their services, this could have a considerable impact on many groups across the UK.

The proposals have also come under fire for being a “stealth tax”. This is because the current fees cover the average costs of making a grant of probate, but the new fee structure is hugely disproportionate.

Is it a new tax?

Introducing a new tax requires new legislation. But the Government is using its existing powers to force the change rather than passing a new law. If passed, the new tax will side-step the long-established exemptions and reliefs of the inheritance tax regime, including the charity exemption.

With concerns that this stealth tax will be shouldered  – in part at least by charities – the impact on the sector is expected to be significant. So much so that millions of much-needed funds could go to the Government, rather than being used to fund vital services.

The Government has responded by stating that the cost to the charity sector is “not expected to be substantial”.

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To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

According to the latest figures, there are currently 9,254 unclaimed estates in the UK. With the average value of an estate worth around £150,000, the total amount of this unclaimed inheritance could be worth billions.

Property, money, personal belongings and other assets are being left in limbo instead of being passed on to relatives or friends. To prevent this from happening, it is vital to make a Will.

 

What happens when you die without a Will?

When someone dies without a Will, and there are no known heirs, their estate will be passed on to the Government (the Crown). Unclaimed assets include property, including buildings, money and personal possessions. And, while in some cases these unclaimed estates are of very little value, they can be worth millions.

Every day the Government publishes an updated list of unclaimed estates. The newest estates are added to the top of the list. An estate remains on the list for a maximum of 30 years, and during this time, relatives can make a claim against it. However, where no heirs are found, the estate is eventually transferred to the Treasury.

 

Who can claim an estate?

Under the UK’s inheritance laws (Rules of Intestacy), people who are blood relatives of the deceased could be entitled to a share of an estate. Even distant relations could be in for a windfall. However, partners are not recognised if they were not married or in a civil partnership and neither are stepchildren.

If you want to make a claim, you will need to contact the Government’s Bona Vacantia Division (BVD) with a family tree detailing how you are related to the person who has died. You may be asked to prove how you are related to the deceased, so the more details you can include (e.g. birth and marriage certificates), the better.

While this process is complex and can take a long time, with millions going unclaimed the result could be worth it.

 

Avoid leaving an unclaimed estate

The best way to make sure that your estate doesn’t end up going to the Government is to create a Will. Making a Will is especially important if you have no or few living relatives. But despite the importance of having a Will, too many people never get around to this inexpensive and simple task.

You don’t have to leave your estate to your family. You can decide to leave your home, money and possessions to whoever you want, including friends and charities. But, only by creating a properly drafted Will can you be sure that your estate will be left as you choose when the time comes.

 

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.