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UK Budget – Expats Hit By Stealth Inheritance Tax Rise
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On Wednesday the UK Chancellor, Rishi Sunak, delivered his budget speech. Most of the speech is irrelevant for expats, however, UK expats are subject to UK Inheritance Tax.
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Inheritance tax is a capital transfer tax. There is a flat rate of 40% of worldwide assets after allowances, reliefs, and exemptions. This tax must be paid before any distribution is made to your heirs. It is therefore a real threat to families who wish to pass on wealth through the generations.
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Because younger people do not think about their death, they are often the least prepared. Consequently, their families are often worst affected by this tax in the event of their untimely demise.
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Inheritance Tax is one of the fastest-growing taxes. In 2017/18, the UK Government received £5.2bn in receipts from inheritance tax. The average bill was £215,000. To put that into context, the UK taxman is receiving a sum almost equivalent to the cost of an average UK property from each estate subject to this tax.
There are plenty of allowances, structures and investments designed to help UK citizens reduce this tax. However, most of the allowances have not changed since 2009. During his speech, the Chancellor extended this freeze for a further 5 years further eroding the benefit of these allowances in real (after inflation) terms.
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Although tax planning is important, understanding your objectives and values are the starting point for estate planning.
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3 Ways We Can Help You Reduce Inheritance Tax
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Valid Will
Having a valid will that states your wishes for your children and assets is the foundation of estate planning. If you do not have a Will or have not reviewed it in a few years, we can help you.
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Structured Gifting
Knowing what to gift and to whom reduces the amount of inheritance tax your estate will pay. As far as possible, gift exempt assets to non-exempt persons and non-exempt assets to exempt persons.
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Use Allowances
Allowances are available, these are annual and lifetime allowances.
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Summary
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UK Expats are subject to UK Inheritance tax on their worldwide assets. Inheritance tax is a capital transfer tax. There is a flat rate of tax of 40%, after allowances, reliefs, and exemptions. Careful planning can reduce this charge. A Will is the starting point for estate planning.
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If you would like to discuss your Will or other estate planning matters, please contact me on 06 574 9244 or contact us.