UK expatriates may be unwittingly storing up inheritance tax problems, even when they have been resi...
UK expatriates may be unwittingly storing up inheritance tax problems, even when they have been resident outside the UK for a number of years, Scottish Equitable International has warned.
Research carried out with IFAs in Spain has shown that many expatriates may be unaware that they still have UK inheritance tax (IHT) liabilities.
UK inheritance tax is based on a person's domicile rather than residence, that is, where an individual's permanent residence is judged to be, rather than where they actually reside.
Margaret Jago, a personal investment technical adviser at Scottish Equitable, said it is generally very difficult for UK expatriates to change their domicile to escape UK IHT liability.
She said: "To alter domicile involves providing concrete evidence that the individual intends to move permanently to a new country."
Many expatriates eventually return to the UK following the death of a spouse and are shocked to be hit by IHT, levied at a flat rate of 40% on the estate in excess of the nil rate band, £234,000 for this tax year.
One way of mitigating IHT is to make use of offshore bonds, Jago said.
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