When you live in the UK and all of your estate is based here too, everything is relatively straightforward. However, if you have a portfolio of property or other assets outside of the UK, you need to consider this when planning your estate.
Let’s look at this in more detail…
First things first, if your main residence, or permanent home, is outside the UK your estate only pays inheritance tax on your UK assets – such as property or bank accounts in the UK. HMRC treat you as living, or domiciled as they like to say, in the UK if you have lived here for 15 of the last 20 years, or had your permanent home in the UK at any time in the last three years of your life.
For the purposes of this article, we are going to assume you are based in the UK, and this is your place of residence.
As we recommend to all clients, the first thing you should do is make a list of all of your assets:
- Properties – both your main residence and any buy to let
- Overseas properties/business premises/land
- Bank accounts
- Stocks and shares – both in the UK and abroad
- Overseas bank accounts
- Other items in your estate – your possessions
The UK is deemed as England, Scotland, Wales and Northern Ireland. Both the Channel Islands and the Isle of Man are deemed as overseas.
Once you have made your list you need to plan how you wish to divide up your estate, before approaching writing your Will.
You need to be aware that when you live in the UK Inheritance Tax (IHT) is payable on your whole estate, including any property or assets overseas.
However, some countries have different inheritance laws to those in England.
For example, in Scotland and France you are obliged to leave a proportion of any property to your children. This means it will be liable for IHT under UK IHT regulations.
You can protect your assets through the use of Trusts, which can help to reduce IHT, dependent on how it is structured. But again, you need to be aware that a number of European countries do not recognise English Trusts so your estate may be liable for local inheritance taxation.
Additionally, you can gift assets to your beneficiaries whilst still alive to help offset tax. But generally, you need to live for a further seven years, for your beneficiaries to avoid any tax liability.
If you have a second home in Europe there are additional complications.
Since the UK left the European Union you cannot stay for more than 90 days in any 180 day period. There is still some debate about how this is going to be handled going forward. At the moment, the indication is that you will need to apply for a long-term visa or become a resident in the country, but that is not straightforward. You should also note that whilst in Europe, over 90 days, you will be expected to pay tax locally, as well as possibly in the UK.
The UK has entered into a double taxation treaty with a number of countries, meaning you should not be liable for tax in the UK and overseas. This does apply to your estate too.
As you can tell, this is far from a simple subject, and there are a lot of complex nuances that can affect you, your beneficiaries, and your estate. Our recommendation is to seek specific professional advice around your personal circumstances.
If you would like support with planning and writing your Will, please contact us on 01344 875 310.