There is a misconception that if you are not resident in the UK, then you’re not liable to UK Inheritance Tax (IHT); this is not entirely true. With other taxes in the UK (such as income tax and capital gains tax), if you are a non-UK resident, then broadly speaking, only the income and gains which you earn and realise in the UK each year will become subject to UK income and capital gains tax respectively. However, for IHT this is very different, because rather than looking at your actual residence status at the point of death, in order to determine the inheritance tax position, the government will consider whether or not you are UK domiciled.
For British expatriates, understanding domicile is an important element of estate planning. The basic rule is that a person is domiciled in the country in which they have their permanent home – the country regarded as your ‘homeland’. You can remain UK-domiciled even after living abroad for many years. To change your domicile, you must be physically present and tax resident in your new country, intend to live there permanently, and not foresee any reason to return to the UK. You need to sever as many ties as possible with the UK, as HMRC will look for any indication that you see the UK as your homeland and may return one day.
Therefore, if you are UK domiciled and living abroad at the time of passing, inheritance tax may be payable on your worldwide assets, if the total value is over the inheritance tax threshold.
We offer Inheritance Tax services for investors who are resident outside of the UK but are still liable to UK IHT for assets held within the UK. Currently our services are available through advisers based in United Arab Emirates. You can learn more about our services and download relevant literature below. If you would like more information or are unclear whether you can access our services, please contact Sam Jermy.