How the new Non Dom Rules Change Inheritance tax liabilities
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ProACT Sam looks how expatriates can benefit under new non dom rules.
Timing is everything
In life timing is everything and never more so than tax. To be tax resident for expats in another country is based upon living more than 6 months in the country.
Your Tax Domicile makes a difference.
Under the old UK tax domicile rules on leaving the UK you could confirm your UK tax domicile on inheritance tax (IHT) assessment.
IHT assessment only occurs if you make a chargeable lifetime gift or you die.
That makes it awkward for UK expats leaving the UK to be sure of liabilities.
For expats coming to the UK the situation is different. Under old rules they would be ‘deemed uk domiciled’ after 15 tax resident years in the UK.
Deemed domicile have worldwide liability to inheritance tax, capital gains , earned and rental income, dividends and interest.
Cut short
The Halloween budget confirmed the UK Tax changes initiated by the previous government to cut short the period before an expat is deemed domicile in the uk from 15 to 4 years.
And it was applied from the date of Halloween 31/10/2024.
So any expat in the UK at that time for 4 tax years or more is deemed domicile with immediate effect.
That means full tax liability on worldwide inheritance tax, capital gains , earned and rental income, dividends and interest.
One respite only is capital gains tax on worldwide assets only looks back 7 uk tax years to values at 5/4/2017. Not least because they would have legal difficulties trying to extend the period of tax grab.
Noting if in the UK at the end of October 2024 you are already deemed tax resident for the current year 2024/25.
No matter if you have overseas business, property rental, capital gains or investments.
Hiding in plain sight
Expats could try to hide their profits, rentals, gains, income and dividends worldwide but with an extensive exchange of information regime operating around the world between governments this is doomed to fail.
Double taxation treaties are for governments benefit. They commit to tax the family and business in bother countries.
Not twice the tax, but the highest rate.
Expats leaving or returning especially need to protect from higher levels under double tax rules.
New tax plans for expatriates
Exchange of information between property agents , banks, investment and pension companies , airlines, tax agents, solicitors, and any other regulated business, ensure all income and gains is shared with an expats local tax office and their home tax office under double taxation treaties.
These measures will continue to be beefed up by international governments in the years ahead to be sure.
So plan ahead to protect your family and business Living and Working Abroad
Follow the lead of the richest families.
The Duke of Westminster doesn’t own the wealth held in his inherited family trust protecting the families wealth since the time of Napoleon.
A ProACT Family Trust can hold family and business assets property, shares, company, investments, pensions, royalty, art and anything else of value.
Trusts are a separate tax entity to you as an individual , your company , your property and your investments. Hence a trust may pay some income taxes , but there is no probate administration and hence inheritance tax assessment on lifetime gifts and inheritances.
Better still the expat deemed domicile in the UK because of tax resident years or birth origin, can be freed from tax on their overseas assets and income.
If you need help and guidance then contact us.
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