• Home
  • News
    • People moves
    • Africa
    • Asia
    • Australia
    • Canada
    • Caribbean
    • Domicile
    • Europe
    • Latin America
    • North America
    • Middle East
    • US
    • US
    • UK
  • Products
    • Funds
    • Pensions
    • Platforms
    • Insurance
    • Investments
    • Private Banking
    • Citizenship
    • Taxation
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Directory
  • Video
  • Advertise with us
  • Directory
  • Events
  • European Fund Selector
  • Newsletters
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
  • Advertise with us
  • Directory
  • Events
    • Upcoming events
      event logo
      International Investment Nordic Forum 2021

      International Investment is delighted to announce the 2021 International Investment Nordic Forum which will take place on Tuesday March 9, at 9am (GMT). This curated virtual event will be broadcast live and will feature a series of fund manager interviews and presentations, as well as interviews with some of the Nordic regions top fund selectors.

      • Date: 09 Mar 2021
      • ONLINE, ONLINE
      View all events
  • European Fund Selector
International Investment
International Investment

Sponsored by

Sharing Alpha
  • Home
  • News
  • Products
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Video
  • Taxation

New rules could lead to IHT liability for UK-based foreign expats: Old Mutual Wealth

New rules could lead to IHT liability for UK-based foreign expats: Old Mutual Wealth
  • Gary Robinson
  • 31 January 2017
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  

Old Mutual Wealth has issued a list of tax year-end considerations that may be useful for foreign expats living in the UK, warning that due to the introduction of new rules many long-term expats could fall foul of Inheritance Tax (IHT) liabilities.

With the Self Assessment deadline finishing this evening and the tax year-end approaching people will be rushing to ensure they maximise their annual allowances and have their finances in good shape. The deadlines apply equally to foreign expats (often referred to as non-UK domiciles) living in the UK, as it does to those who were born in the UK, Old Mutual Wealth said.

Related articles

  • Int’l life policies’ status boosted by non-dom changes: Lombard Int’l
  • Mark Davies: Pending UK non-dom reform - fight, or flight?
  • Non-dom reforms among a series of shock changes put ‘on hold’ by UK gov’t
  • Non-doms and the 'domicile conundrum'

And this year, foreign expats may have even more considerations due to new regulations coming into force from 6 April, according to Rachael Griffin, a taxation and financial planning expert at Old Mutual Wealth.

“Foreign expats have legitimate tax planning opportunities available to them, in much the same way as UK nationals do,” said Griffin. “It is important to seek professional advice before the tax year end deadline to maximise these opportunities and ensure finances are structured in the most effective way possible.

“Professional advice is especially important for those who have been in the UK for nearly 15 years, as any restructuring of overseas assets may need to take place prior to them becoming deemed UK domiciled for tax purposes,” she said.

Rachael Griffin’s top 6 tax year-end considerations for foreign expats in the UK:

  1. Inheritance tax implications for those living in the UK for 15 years:

From 6 April 2017, the calculation used to determine when a foreign expat (non UK-domicile) living in the UK becomes deemed UK domiciled for tax purposes will tighten. The timescale will reduce from 17 out of 20 years to 15 out of 20 years.

For anyone approaching the 15 year deadline, they will need to take advice regarding inheritance tax (IHT), as once they become deemed UK domicile they will become liable to UK IHT on their world-wide assets.

  1. Implications for those on the remittance basis approaching the 15 year deadline:

Foreign expats living in the UK can choose to pay tax on a ‘remittance basis’, which means they are not required to pay UK tax on their foreign assets. Once a foreign expat has been in the UK for five years, they need to start paying HMRC a charge each year to remain on the remittance basis. They can continue on the remittance basis until they become deemed UK domiciled (which will be once they have been in the UK for 15 out of 20 years).

Those on the remittance basis approaching this 15 year deadline may benefit from taking immediate action. They have a window of opportunity to help ensure their overseas finances are structured in the best way possible. For example, assets can be placed in an Excluded Property Trust, a legitimate way of mitigating any income and capital gains tax arising from assets held outside the UK. Assets will need to be placed inside the trust before they become deemed UK domiciled.

  1. Any UK property held through an offshore company structure should be reviewed:

From 6 April 2017, foreign expats investing in UK property through an overseas corporate structure or trust, known as ‘enveloping’, will no longer be excluded from UK IHT. HMRC will essentially ‘see through’ the corporate structure, making them ineffective from an IHT planning perspective.

It might make sense for these structures to be unwound as they will no longer be effective and may not justify the ongoing fees involved. If individuals are concerned about their exposure to UK IHT, they may benefit from some estate planning to help ensure beneficiaries have enough money to pay any IHT liability.

  1. Maximise ISA and pension contributions:

Foreign expats living and working in the UK (paying UK income tax) are able to invest in ISAs and pensions and benefit from tax efficient investing in the same way as those who were born in the UK. This can help their investments grow tax efficiently while they are in the UK, and they can continue to hold the investment when overseas, though the tax advantages may be limited.

  1. Utilise Capital Gains Tax (CGT) allowance:

Foreign expats living in the UK are liable to UK CGT on their UK and world-wide investments (those on the remittance basis are liable to UK CGT on their UK assets only). This means they are entitled to an annual tax-free allowance, currently £11,100. Making the most of the annual allowance by selling investments and recognising the gain on a regular basis could prove highly effective.

  1. Utilise annual gift allowance:

On death, foreign expats are liable to UK IHT on their UK assets. They are also liable to UK IHT on their worldwide assets if they have been in the UK for 15 years – as explained above. Utilising the annual gift allowances of £3,000 a year can be an effective way of passing wealth on to future generations bit by bit, rather than waiting and storing up future IHT problems.

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  
  • Topics
  • Taxation
  • Rest of World
  • UK
  • IHT
  • Old Mutual
  • Old Mutual Wealth
  • taxation

More on Taxation

Report proposes 5% UK wealth tax to offset pandemic costs

  • Taxation
  • 09 December 2020
Britons in France warned of steep capital gains tax rises when selling property

  • Taxation
  • 07 December 2020
HMRC payments to tax evasion whistleblowers up 63%

  • Taxation
  • 04 December 2020
OECD to issue international crypto tax evasion standards next year

  • Cryptocurrencies
  • 04 December 2020
Global tax evasion costs $427bn per year

  • Taxation
  • 04 December 2020
Back to Top

Most read

Duff & Phelps opens Gibraltar office
Duff & Phelps opens Gibraltar office
Brexit deals hefty blow to City but industry is ready to fight back
Brexit deals hefty blow to City but industry is ready to fight back
Comment: Are cryptocurrencies the new gold?
Comment: Are cryptocurrencies the new gold?
FSCS warns industry of £1bn compensation bill
FSCS warns industry of £1bn compensation bill
Dubai regulator to develop cryptocurrency framework
Dubai regulator to develop cryptocurrency framework
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017
Loading