Inheritance Tax

Most people think about planning for not only their future but for their loved ones. Inheritance Tax (“IHT”) is payable on an individual’s Estate when they die and also on certain lifetime gifts. Whilst it is often an emotive issue, steps can be taken to avoid what is often regarded as a “voluntary” tax.

Inheritance is determined by an individual’s domicile, not residence which is a popular misconception.

Domicile is generally determined by where an individual’s father was born. However, it is possible to have a domicile of choice providing certain stringent conditions can be demonstrated.

An individual who is domiciled in the UK is liable to IHT on their worldwide assets, whereas as a non UK domiciled individual is only liable to IHT on assets situated in the UK.

A non UK domiciled individual will become “deemed UK domiciled” if they have been resident in the UK for 17 out of the last 20 years.

There are special rules regarding IHT for those from particular jurisdictions, for example India, where an individual may qualify for exemption from UK IHT under longstanding rules.

We can advise on all matters of IHT, including:-

  • calculating the potential exposure;

  • chargeable lifetime transfers and potential exempt transfers;

  • planning to mitigate any potential exposure, including the use of trusts and life assurance;

  • the various exemptions and reliefs that can be accessed to mitigate potential IHT exposure; and

  • deemed UK domicile” for non-UK domiciled individuals.

HMRC have indicted that new rules may be introduced to determine an individual’s domicile. However, this is currently subject to consultation with a number of parties.