Avoiding Inheritance Tax

Avoiding inheritance tax through emigration



Avoiding inheritance tax through emigration might not be as far-fetched and extreme as it first sounds.


One couple mentioned in the press in recent days, had moved to Australia.  They were advised that if they planned to stay there permanently, they would eventually become Australian citizens – great news, as Australia does not apply inheritance tax to estates.


Generally, UK couples who emigrate are still classed as having a UK domicile within three tax years after they leave.  This means that they would still be liable for UK inheritance tax on all assets valued over the nil rate band, should they die during this time.


In addition, if any property remains theirs within the UK, this is classed as being a domicile and the above will apply.  Therefore, all ties to assets in the UK must be severed.

Inheritance tax exemption for increased council tax

Following calls for a new approach to wealth tax, the Lib Dem party has suggested introducing an exemption from inheritance tax on homes where owners have agreed to pay more council tax.
For many years, The Lib Dems have criticised the concept of inheritance tax, claiming that it is unfair, due to it taxing funds which have already been subject to income tax.
These new proposals, which the party is calling “Mansion Tax”, calls for the option to be given to owners of homes valued within higher price bands, to choose whether or not they would prefer to pay a higher rate of council tax in return for an exemption from inheritance tax.

The Mansion Tax proposals will be discussed in more detail at the party’s political conference in the next few weeks.

Avoiding Inheritance Tax – How Can I Make Gifts?


In addition to the permitted annual gift of £3000 in any one year, each parent of a couple being married (whether a traditional wedding or a civil partnership) is able to make a gift to the couple of up to £5000, and each grandparent can give £2,500. Otherwise, a wedding guest can make a present of up to £1000.

So, whether your child, grandchild, friend or member of the family is getting married and you have the funds available, consider giving them a gift in the form of money. In these difficult economic times, they will no doubt welcome the additional cash and you will benefit from using your exemptions and avoiding inheritance tax.

Funds, Pensions & ISAs

Grandparents are able to invest up to £3,600 a year into each grandchild’s stakeholder pension until they turn 18.
Existing Child Trust Funds (scrapped by the government in January 2011) can also provide a route for investing funds which will then be placed outside the remit of IHT. Up to £1,200 can be invested in each account annually. These investments are also exempt from any other tax.

Introduced in November 2011, junior ISAs are a valid alternative to Child Trust Funds in that they allow annual investments of up to £3,600. Whereas a child cannot access the funds from their CTF until they are 18, a junior ISA will allow them to manage their account from the age of 16 although again, they may not access the money until they are 18.

To find out how to manage your money effectively now, to avoid your loved ones having to pay a large Inheritance Tax bill after your death, contact a estate planning professional today.

Want to reduce your Inheritance Tax liability?

Despite the suspected economic recession, rise in living costs and freeze on salaries, most of us are still able to retain our homes and assets which means that a high percentage of people will find that they have assets which have pushed them over the Inheritance Tax threshold of £325,000.

If you suspect that this is the case with your Estate (bearing in mind, the value of your home will also be taken into account), then there are ways to bring you back within the threshold, if you act now to prevent the tax man taking 40% of the value of your Estate.

Your first task should be to prepare a Will, if you haven’t done so already. If you’ve had a simple Will prepared without having planned specifically to reduce Inheritance Tax liability, have it looked at again.

It is worth noting that transfers between spouses and formally recognised civil partners are recognised as being exempt, known as the IHT nil-rate band. This means that when the first partner dies, their entire Estate can be transferred to the surviving spouse, without any Inheritance Tax being charged. When the survivor themselves die, any nil-rate band not used when the first partner died, can be claimed.

If you own a business, your next of kin may be able to claim Business Property Relief upon your death. This could mean that if you pass your business assets onto your children, they could claim IHT exemption for up to 100% of the value of your entire business assets.

There are a number of ways to plan effectively to reduce your Inheritance Tax liability simply by planning the content of your Will carefully. A probate expert will outline the choices available to you, which could potentially keep thousands of pounds in your Estate to be passed to your children – not the tax man.

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