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Inheritance Tax

Tax PlanningInheritance Tax

Estate and inheritance taxes are broadly similar because both are generally triggered by death. Estate taxes are levied on the net value of property owned by a deceased person on the date of their death. In contrast, inheritance taxes are levied on the recipients of the property. Both taxes are generally paired with gift tax so that they cannot be avoided by simply transferring the property before death.

Where is inheritance tax levied?

Many countries levy taxes on estates or inheritances, including

  • France
  • USA
  • UK
  • Spain
  • Ireland
  • Japan – has the highest top marginal rate at a whopping 55%
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How is IHT tax paid?

In the UK, Inheritance Tax (IHT) is paid on the value of the deceased’s estate, at the rate of 40% on the value above your available Nil Rate Band (NRB), currently GBP 325,000.

Most people retain their domicile, even if they have been living abroad for a prolonged period. It’s a common misconception among UK expats that only UK assets will be subject to UK inheritance tax. The UK tax system, like others, operates on a worldwide basis. This means a deceased person’s worldwide estate will be subject to inheritance tax.

Inheritance Tax If You Are An Expat

An expat may also be subject to the inheritance tax laws of foreign countries in which they hold assets. There are also different rules around non-domiciled spouses and partners. That’s why it’s important to be clear and up-to-date on your estate planning with an expat will.

Before probate can be granted, the probate fee and any inheritance tax due on an estate must be paid, so there could be a significant bill for beneficiaries to pay before they can access their inheritance. Setting up a life insurance policy could help ensure your beneficiaries have access to cash to pay all required fees.

But there are other ways to go about it. Lord Roy Jenkins – a former chancellor of the exchequer – described inheritance tax in a 1986 Commons debate as “broadly speaking, a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.”

If you are an Australian expat, the 10 year tax rule is a tax incentive that can benefit Australians and those who are planning on relocating to Australia. The rule states that an investment that is held for ten years can be withdrawn tax-free.


Inheritance tax exemptions

There are measures that can be taken to limit liability to inheritance tax which includes:


More tax options


With so many options available to reduce your beneficiaries’ future liability, some that can span years, it is prudent to start (or update) your estate planning now. We always recommend that you seek professional advice when tax planning.

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