UK Inheritance Tax Can Take Up To 40% Of The Money You Leave To Your Spouse!

UK Inheritance Tax Advice

Did you know – if you are a British person married to a non-Brit, your spouse could be liable for a UK Inheritance Tax bill of up to 40% of your worldwide assets upon your death?

UK Inheritance Tax (IHT) is like a ball and chain that follows UK domiciles around the world throughout their lifetime, subjecting everything they own to a 40% tax bill upon their death. Despite what many believe, being out of the UK as an expat does not get you off the hook!

UK inheritance tax is payable on everything owned by a UK domiciled person (including their share of joint assets), regardless of where they actually live.

Furthermore, everyone, UK domicile or not, is liable for IHT on any UK based assets (e.g. property), above the standard exemption limit of GBP 325,000 (called the Nil Rate Band or NRB).

So how do you know if you are UK domiciled?

  • UK domicile rules follow the domicile of paternal birth – which means if a father has UK domicile then his children are very likely to be UK domiciled, even if they weren’t born in the UK.
  • If a non-UK domiciled individual has lived in the UK for 17 out of 20 years (this is changing to 15 out of 20 years in April 2017), they will automatically be deemed as domiciled in the UK.
But my wife / husband gets everything – not necessarily!!

In respect of married couples, if both spouses are UK domiciled then one spouse can inherit the full estate of the other without being subject to IHT. IHT will only be due when the survivor dies.

However, if one spouse is non-UK domiciled (eg a UK domiciled individual married to a Singaporean) then the non-domiciled spouse does not automatically qualify for an unlimited tax free transfer of assets.

A non-UK domiciled spouse can receive any available Nil Rate Band plus a lifetime tax free amount equal to the Nil Rate Band of GBP 325,000. This caps the tax free amount at a maximum of GBP 650,000 with 40% tax being due on the rest.

It is now possible for a non-UK domiciled spouse to elect to be treated as UK domiciled, allowing a full inter-spousal transfer of assets free of any UK inheritance tax. Great care should be taken on relying on this as a strategy as:

  • The election will mean IHT will be due on the non UK assets owned by the non-UK domiciled spouse
  • The election is irrevocable

There are strategies which can reduce, or in some cases eliminate, IHT. It is essential to take advice to protect your wealth from up to 40% tax in a legally compliant manner.

AAM Wealth Solutions work with you to develop a bespoke Wealth Preservation Strategy for you. Contact your AAM Financial Planner today to discuss how you can ensure that your loved ones are not saddled with a hefty tax bill when you die.

Ian Black
Head of Wealth Solutions
AAM Advisory Pte Ltd


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