Good old Gordon Brown - yesterday he gave us a Budget for the people, it’s full of sensible tax increases and generous tax breaks, he’s giving with one hand whilst taking away with the other and what do we care anyway because we’re expatriates, we’re living abroad and we’re unaffected by the UK Chancellor right? Wrong!
If you don’t protect your assets now I can guarantee you’ll hate yourself later – or your family will – because Gordon Brown’s latest seemingly generous budget isn’t ‘all that’ when it comes to inheritance tax - and because chances are you’re UK non-resident but UK domiciled, you and your assets will still be affected by the UK laws on IHT unless you do something about your situation today.
On the face of it yesterday’s budget appears to be quite generous when it comes to IHT…but dig a little deeper and look a little closer and you’ll see that things don’t quite add up.
At the moment the inheritance tax nil rate threshold is GBP 285,000 (correct at time of writing)…that means if your estate is worth GBP 285,000 or less your benefactors will not be liable for taxation on it when you die. At the moment around 6% of UK domiciled individuals’ estates are worth more than this and their beneficiaries have to pay 40% tax on any amount over and above this threshold.
Going forward this nil rate threshold is going to increase to GBP 300,000 for the 2007- 2008 tax year, GBP 312,000 from 2008 to 2009, GBP 325,000 from 2009 to 2010 and finally it will reach GBP 350,000 in 2010 meaning that in theory, even fewer people will become affected by IHT and that it really will be a tax that only the wealthiest of the wealthy will have to worry about.
All very generous you might think…
But no, according to the accountancy firm KPMG (who know a lot about all these things), Mr. Brown has once again failed to take into account UK house price inflation.
Whilst Gordon may have said that no more than 94% of UK households will be affected by IHT thanks to his new shiny budget (in other words, no change from the current situation) KPMG think this is actually highly optimistic and that in reality the IHT nil rate threshold changes fall far short of the mark if Gordon Brown wants to ensure that no more than 6% of the population is affected.
If you still own assets in the UK…even if it’s just a bank account or a property you occasionally use or still have in joint names with a divorced spouse…you will still be considered to be UK domiciled – even if you’ve been an expat living abroad for years and years. In fact, if the UK taxman has even the tiniest of inklings that you still consider yourself to be British he will come looking for your estate after you have shuffled off this mortal coil so, as stated, if you don’t protect your assets now, you’ll hate yourself later.
So, what can you do? Well, you have to take personal advice…everyone’s situation is so far different and depending on where in the world you live you may even have IHT type liabilities and succession issues to deal with locally as well. You have to ensure the person giving you advice understands cross border issues and can give you the best advice possible, and structure your asset protection strategy accordingly so as to legitimately mitigate your entire estate’s potential tax burden.
Don’t wait – make the necessary calls or .(JavaScript must be enabled to view this email address) to get in touch with an adviser or planner.
