British expats who have moved overseas with “golden visas” could find their worldwide wealth is subject to UK inheritance tax upon their demise.
Many fail to fully understand the tax rules, incorrectly assuming inheritance tax would only apply to their UK estate, experts have warned.
Expats may be able to move to nations such as the United Arab Emirates after buying golden visas which allow them to stay for up to 10 years and benefit from rules which mean they pay little-to-no income tax.
But, while they may not have to pay personal income tax, what British expats might not realise is their families may still be liable to pay inheritance tax on their assets upon death.
British expats who have moved overseas with “golden visas” could find their worldwide wealth is subject to UK inheritance tax
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Chris Etherington, of tax advisers RSM, told The Telegraph: “If you are a British expat living overseas, like in Dubai, then just because you have fallen out of the income and capital gains net in the UK, you are still liable to inheritance tax on your worldwide or UK assets.
“You need to make a more permanent change to your lifestyle to cut ties with the UK for inheritance tax purposes.
“Even if you had moved and changed your domicile to the UAE, the issue is that you are still subject to inheritance tax on your UK assets. That trips people up, especially if they retained assets or property in the UK.”
Daniel Tomassen, senior manager in the private client department at HW Fisher, told GB News: “UK inheritance tax is applicable for individuals who are UK domiciled or do not have a UK domicile but have UK situs assets.
“In UK common law, domicile is a concept that broadly refers to where an individual has their permanent home. Generally, individuals have a domicile of origin and this is acquired at birth and follows the domicile of their father e.g. if your father’s permanent home is the UK then you would have a UK domicile."
Mr Tomassen explained it is possible for individuals to shred their domicile of origin by acquiring a new domicile, known as acquiring a domicile of choice.
However, “many” expats incorrectly believe they have acquired this.
He said: “To acquire a new domicile, they must be intent on residing in another country indefinitely. Many expats believe that they have acquired a domicile of choice overseas by moving abroad, but it is not that simple.
“Many people who move abroad retain sufficient ties with the UK which prevents them from obtaining a domicile of jurisdiction in another country. This means that they continue to be subject to UK inheritance tax, even though they live abroad.”
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David Denton, technical consultant at Quilter Cheviot, told GB News: “For those with a domicile of England and Wales (or Scotland, or NI), their worldwide wealth is exposed to IHT upon their demise, subject to relief and exemptions, most notably the long frozen nil rate band of £325,000.
"Those without an England and Wales domicile, or who have managed to acquire a domicile elsewhere and shed their UK domicile, are subject to inheritance tax only on their UK estate.
“There is no prescriptive timescale of how long this takes, and no longer a process for even a provisional ruling from HMRC on this matter. Rather one must reside in another country with the intention of doing so permanently or indefinitely, severing links with the UK.
“It is highly questionable if this is possible in those countries where a resident hasn’t acquired the right to live indefinitely, including many middle eastern countries.
