I read with interest that figures released by HMRC last week showed an increase in Inheritance Tax of £200,000,000, yes 200 million, to £5.4 billion in the tax year 2018-19, a rise of 3% from the previous year and more than double the figure of 9 years ago.

A frozen nil rate band and rising property prices have attributed to this rise, yet the question remains how much of the “death tax” could have been reduced with a little planning, and why don’t more people appear to be doing it?  The fear of the unknown and the unwillingness to pay for advice and structures could be two reasons, while something as simple as British expats being unaware that they have retained their UK Domicile status while living overseas will without doubt be another.   

Losing a UK Domicile status is an incredibly difficult and complex process requiring in-depth planning and work. Individuals then must live within definitive guidelines for the rest of their lives. Incredibly though their Domicile is not actually determined until they actually die and their file is reviewed by a member of HMRC. However, understanding whether it is likely if a Domicile status could be changed or not can be achieved relatively quickly with a short phone call or meeting with a tax advisor.

If, as the vast majority of people will be, you are stuck with your UK Domicile status then measures can be put in place to reduce your potential IHT bill by assigning assets in to Trust which will ring fence the assets and allow you to still receive an income from them.  Taking out a life assurance policy, rightly, remains a popular method for people to offset IHT or to leave to their next of kin, yet failure to assign the policy in to the Trust will result in the proceeds falling to the deceased’s estate and being liable to IHT and probate.

The bottom line is that as much as it is unpopular Inheritance Tax is not going anywhere and unless provisions are put in place then 40% of your Worldwide Assets will be liable to HMRC above the nil rate band.  To put that in context for a couple with assets worth £1.5 million, of that £340,000 will be due to the tax man which is the equivalent of 22.67% of their estate which could have been left to their loved ones.

If you would like to find out how we can assist you please contact us.