A person who is UK domiciled (whether resident here or not) is subject to inheritance tax on their worldwide assets. If you are UK domiciled, domicile does not affect your income or capital gains tax position (although residence does). Non-UK assets are outside the UK inheritance tax net.
Are non UK residents subject to inheritance tax?
Even if you are an expat living outside of the UK, you will still be subject to inheritance tax in the UK if you are deemed to be of a UK domicile status. If you’ve got a non-domicile status in the UK, only UK based assets will be liable to inheritance tax in the UK.
What is the scope of the charge to IHT for a non UK domicile?
Limited scope of IHT IHT applies at 40% to assets both within and outside the UK, except to the extent that they are protected by the exemption for assets passing to a surviving spouse, or fall within the individual’s “nil rate band”.
What is domicile for UK tax?
UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income. The same rules apply if you make any foreign capital gains, for example you sell shares or a second home.
Can a non UK domicile be used for IHT?
For someone who has acquired a non UK domicile of choice but who was born in the UK with a UK domicile of origin, care must be taken about return visits to the UK to avoid becoming unknowingly deemed UK domiciled for IHT purposes.
Can a non UK domicile be taxed in the UK?
For someone who is non UK domiciled, only UK based assets will be assessed. For worldwide assets being assessed, tax relief may be available in terms of a double tax treaty or in terms of the UK tax legislation but this is unlikely to be the case where the other country does not have an equivalent to UK IHT (and a number of countries do not).
When do you become a deemed domicile in the UK?
The deemed domicile rules for Inheritance Tax are also changing. To meet this condition you must: Condition B is met when you’ve been UK resident for at least 15 of the 20 tax years immediately before the relevant tax year. All UK tax years of residence must be counted including:
How does domicile affect inheritance tax in the UK?
In the UK, when someone dies, domicile will be a key factor in assessing the extent of their estate’s liability to UK Inheritance Tax (“IHT”). Quite simply, for someone who is UK domiciled, on their death, their worldwide assets will be subject to assessment in the UK.
