Uk Inheritance tax (IHT) on supporting my girlfriend.

[davee58]

Hi.
Following the recent death of my Mother in the UK I became aware of UK Inheritance tax and started to investigate how it will apply in the case of a foreign domiciled spouse or Girlfriend.

 

Me and my Girlfriend have been together over 15 years, we are not married and spend the majority of the year apart due to my UK commitments.  She has never visited the UK. When I am away I send an allowance through Western Union as "Family Support".

 

As things stand I will be liable to IHT on my death due to my UK property and savings.

 

It seems that after my death the UK tax authorities could class all my years worth of family support as "Gifts" and demand 40% IHT on the whole lot.  The seven year exemption rule for gifts does not apply for gifts made to a non-UK domiciled person. 

Also if we were to marry, IHT exempt transfer to my wife would be limited to the first £325,000, this would include the value of all "Gifts" made prior to our wedding.
 

Does anybody have experience in this area, I intend to discuss this with a UK accountant however feel that I might get better advice and different insights here.

[Celsius]

I guess for this to work your wife would have to be a UK resident. 

[retarius]

Good god......you just smashed my plans to smithereens. I left the UK 40 odd years ago and assumed that owning no assets there, my mrs would pay no taxes. Thanks anyway, I'll hire a tax accountant in Bangkok to look into my total taxation picture. It is complicated because it involves assets in several countries (taxes paid on all of them, I might add). But I'm funcked if I'm giving the UK anything when I die if I can possibly avoid it. 

[Liverpool Lou]

1 hour ago, davee58 said:

I intend to discuss this with a UK accountant however feel that I might get better advice and different insights here.

Qualified UK accountant or anonymous, semi-literate, unqualified Asean Now posters flitting between guessing and googling for IHT advice?   What?  Difficult decision..seriously.

Edited October 6, 2023 by Liverpool Lou

[topt]

1 hour ago, retarius said:

Good god......you just smashed my plans to smithereens. I left the UK 40 odd years ago and assumed that owning no assets there, my mrs would pay no taxes. Thanks anyway, I'll hire a tax accountant in Bangkok to look into my total taxation picture. It is complicated because it involves assets in several countries (taxes paid on all of them, I might add). But I'm funcked if I'm giving the UK anything when I die if I can possibly avoid it. 

About the only way you can avoid it, without possibly getting into complicated trusts, is to try and become non domiciled which from my readings is also very hit and miss. 

 

There have been one or two threads on here but not sure anyone has actually come back to say they have definitively achieved it. 

 

I for one would be interested to hear of any solutions you come up with. 

[topt]

2 hours ago, davee58 said:

The seven year exemption rule for gifts does not apply for gifts made to a non-UK domiciled person. 

Thanks for highlighting that as I was also not aware. Do you have a specific link you can share at all? 

[davee58]

1 hour ago, Liverpool Lou said:

Qualified UK accountant or anonymous, semi-literate, unqualified Asean Now posters flitting between guessing and googling for IHT advice?   What?  Difficult decision..seriously.

Good point, however there is no decision involved.  I will be discussing this with a UK accountant and might well see if he would be an executor for me rather than dumping a total mess on my sister or other surviving relatives.

 

What I am interested in is how others have handled this situation, what action can be taken to minimise the impact and how a worst case scenario can be avoided.

[Hanaguma]

You poor bastards.  How in the world do you let your government rape you like this? 

[Robin]

I looked at this some years ago, and had my accountant investigate the UK law at the time.  I had always assumed that inheritance between husband and wife( we were married in UK,)  was free from IHT.   

Not so!   If your wife/ Gf is not a UK resident she will have to pay UK IHT on any money you leave to her.   probably  even more so if you are no legally married  in UK.

I cannot confirm that the law has not changed, but that was how it was 5 yrs ago. 

 If you have any other family , (from previous relationships) in UK, I can only strongly suggest that you make a UK/Thai Will stating your desires as to inheritance to your g/f.    Get it legally written down and notarised . with all your assets  defined.  Never trust the good will of any family members or friends, make it legal and clear.  it is better your g/f gets 70% of something than 100% of nothing.

When I did this, i tried to make sure that my wife would be OK even after paying IHT, by making sure she was the owner of all our property in Thailand, and that she had money in our joint Kbank account.  Any doubts, then consul a qualified UK tax accountant, I m only telling you what I learned some yea ago..  I am still in touch with my accountant and he ahs not told me of any changes in UK law, but you never know.

Now we also have Srettha's new tax laws to worry abut as well

[marquess]

A most pernicious tax orginally introduced by William Harcourt to target the rich. Best thing to do is open up an offshore company and place the assets there. (Depending on the value of the said assets)

[Neeranam]

17 minutes ago, Robin said:

I looked at this some years ago, and had my accountant investigate the UK law at the time.  I had always assumed that inheritance between husband and wife( we were married in UK,)  was free from IHT.   

Not so!   If your wife/ Gf is not a UK resident she will have to pay UK IHT on any money you leave to her.   probably  even more so if you are no legally married  in UK.

I cannot confirm that the law has not changed, but that was how it was 5 yrs ago. 

 If you have any other family , (from previous relationships) in UK, I can only strongly suggest that you make a UK/Thai Will stating your desires as to inheritance to your g/f.    Get it legally written down and notarised . with all your assets  defined.  Never trust the good will of any family members or friends, make it legal and clear.  it is better your g/f gets 70% of something than 100% of nothing.

When I did this, i tried to make sure that my wife would be OK even after paying IHT, by making sure she was the owner of all our property in Thailand, and that she had money in our joint Kbank account.  Any doubts, then consul a qualified UK tax accountant, I m only telling you what I learned some yea ago..  I am still in touch with my accountant and he ahs not told me of any changes in UK law, but you never know.

Now we also have Srettha's new tax laws to worry abut as well

Interesting, thanks for posting. 

Not sure what you mean about your wife having money in Kbank joint account. Surely it is both of your money?

My mother gave her house to me a few years back to hopefully avoid Inheritance tax. Not sure how that will pan out, if she dies before me. 

I believe, as a Thai citizen and resident, it makes no difference regarding IHT.

If it does, I want to know.  

[davee58]

37 minutes ago, topt said:

Thanks for highlighting that as I was also not aware. Do you have a specific link you can share at all? 

This HMRC document is about ten years old: HMRC document

The end of the first page states:
 

Quote

Where the spouse or civil partner to whom the assets are transferred does not have a UK domicile there is a lifetime limit (cap) on the value of the assets that can be transferred free of IHT. The cap is currently £55,000 - section 18(2) Inheritance Tax Act 1984.

Quote

Proposed revisions
Legislation will be introduced in Finance Bill 2013 to reform the IHT treatment of transfers between UK-domiciled individuals and their non-UK domiciled spouse or civil partners in two ways: • the cap will be increased to the level of the prevailing nil-rate band level; and, • under a new election regime, individuals domiciled other than in the UK and who are married or in a civil partnership with a UK domiciled person will be able to elec...

The lifetime limit was revised to £325,000 the current nil-band limit. 

If you have had several non domiciled wives the assets transferred are cumulative so your wife at the time of your death will potentially face paying 40% tax on money transferred to earlier wives.

We are not married...

[davee58]

51 minutes ago, topt said:

Thanks for highlighting that as I was also not aware. Do you have a specific link you can share at all? 

In fact, here is an up to date link to Deloitte:  Deloitte

[topt]

9 minutes ago, davee58 said:

In fact, here is an up to date link to Deloitte:  Deloitte

Thanks that is very useful.

Good job all my transfers have been direct to my account here so some degree of separation.

 

Not sure how well HMRC can track all this "gifting" especially after you are dead but would be interested to hear from anyone who has gone through probate where it has come up?

 

[retarius]

1 hour ago, topt said:

About the only way you can avoid it, without possibly getting into complicated trusts, is to try and become non domiciled which from my readings is also very hit and miss. 

 

There have been one or two threads on here but not sure anyone has actually come back to say they have definitively achieved it. 

 

I for one would be interested to hear of any solutions you come up with. 

To be honest I am going to 'apply' for non-domicile. I left the UK 40 years ago and have no ties there. No close relatives since my mother died. Very few assets there I have a strong case. 

My other alternative has not been viable until the recent change in taxation law. My Non O visa is in my UK passport. I have not wanted to go through the hassle of changing it to either my US or Irish passport. but given the taxation situation here, if I have to pay ANY taxes at all to the Thai government I can drop the Non O visa and come in on 90 tourist visas or visa exempt making sure I am in Thailand for less than 180 days. I have another home in Asia where I usually spend 3 months anyway, so to another 3 months visiting family in the US or Europe is no big deal. 

[Liverpool Lou]

4 hours ago, Neeranam said:

If your wife/ Gf is not a UK resident she will have to pay UK IHT on any money you leave to her. 

Nonsense, beneficiaries of estates named in wills do not pay inheritance tax on their inheritance, the estate of the deceased pays any inheritance tax that is due, through the executor.

[Liverpool Lou]

4 hours ago, topt said:

Not sure how well HMRC can track all this "gifting" especially after you are dead

Gifts exceeding the £3,000 annual exemption have to be declared on the individual's tax returns.  HMRC knows and has its way of finding out if necessary.

Edited October 6, 2023 by Liverpool Lou

[persimmon]

I think you are allowed to give away £ 3000 per year without any tax implications . Also , you can give away as much as you like as long as you do it regularly , make a note of it , and can prove it`s from excess income ( ie. you can afford to give it away without impacting on a reasonable lifestyle ).

There are various ways of avoiding the worst of IHT , such as using trusts , but it`s all quite complicated , so best to consult an expert . You can give away as much as you like to anyone without paying any tax , as long as you survive a further 7 years .

 

[Celsius]

3 hours ago, Liverpool Lou said:

Nonsense, beneficiaries of estates named in wills do not pay inheritance tax on their inheritance, the estate of the deceased pays any inheritance tax that is due, through the executor.

You already forgot?

 

 

"Qualified UK accountant or anonymous, semi-literate, unqualified Asean Now posters flitting between guessing and googling for IHT advice? "

[Neeranam]

3 hours ago, Liverpool Lou said:

Nonsense, beneficiaries of estates named in wills do not pay inheritance tax on their inheritance, the estate of the deceased pays any inheritance tax that is due, through the executor.

I never said what you quoted. 

[noobexpat]

9 hours ago, Neeranam said:

Interesting, thanks for posting. 

Not sure what you mean about your wife having money in Kbank joint account. Surely it is both of your money?

My mother gave her house to me a few years back to hopefully avoid Inheritance tax. Not sure how that will pan out, if she dies before me. 

I believe, as a Thai citizen and resident, it makes no difference regarding IHT.

If it does, I want to know.  

From the date of the gift its a PET (potentially exempt transfer). If her death occurs within 7 years, the value of the gift uses up her starting nil rate band, currently £325k. The excess is chargeable at 40% IHT.

 

If she was married, then she likely has 2 NRB's so £650k allowance.

 

If she dies after 7 years, then its a successful gift. 

[noobexpat]

4 hours ago, Liverpool Lou said:

Gifts exceeding the £3,000 annual exemption have to be declared on the individual's tax returns.  HMRC knows and has its way of finding out if necessary.

Are you confusing this with gifts to charity.

Trusts have to be registered with hmrc, but the gift inside it does not.

[noobexpat]

I've done lots of IHT planning over the years. Fairly infrequent so can be a bit rusty. Eg...

 

Gifts into discretionary and absolute trusts (most popular)

Loan trusts

Discounted gift trust 

AIM investments using business relief

 

Edited October 6, 2023 by noobexpat
.

[noobexpat]

1 hour ago, persimmon said:

You can give away as much as you like to anyone without paying any tax , as long as you survive a further 7 years .

 

The gift history can actually can go back 14 years. Bit of a myth that its only 7 but usually it is!

 

Gifting out of normal income that doesn't deteriorate your lifestyle is also free from IHT. 

[noobexpat]

5 hours ago, Liverpool Lou said:

Nonsense, beneficiaries of estates named in wills do not pay inheritance tax on their inheritance, the estate of the deceased pays any inheritance tax that is due, through the executor.

You are not considering the situation of intestate. Probate cannot be granted until IHT bill is settled and the beneficiary has to setup a short term bridging loan if needed. These are arranged via the solicitors usually.

[Neeranam]

35 minutes ago, noobexpat said:

From the date of the gift its a PET (potentially exempt transfer). If her death occurs within 7 years, the value of the gift uses up her starting nil rate band, currently £325k. The excess is chargeable at 40% IHT.

 

If she was married, then she likely has 2 NRB's so £650k allowance.

 

If she dies after 7 years, then its a successful gift. 

OK, thanks for the info. 

 

[Vibora99]

Starting from your disastrous comment that you would find the solution here...which suggests your level of reasoning…You are worried about the taxes that will apply to your inheritance (so sell before you die and spend it, you work and your “girlfriend” has fun all year with your money and spread her legs 1 month a year, the poor thing is doing to remove part of the inheritance????)Or you are also one of the disbelievers who believe that your Thai girlfriend “Loves you”. You have never understood that this is a business…Stop thinking stupid things and enjoy life, your death will be enjoyed by others…

[Elkski]

So sad these things are so complicated.   I need to do some planning for sure.  USA but same same

[deadbeat]

The tories are likely to raise the threshold as part of their election manifesto, not a given that they will get in tho.

It has been said before, the only people who pay inheritance tax are those who trust their families less than the govt. 

Nuff said.

[worrab]

I have recently had my Mother pass away and my sister and I are going through the probate process. This is all being handled by the family solicitors who are also executors of the will. There are very few loopholes to get around this and now there is talk of lowering the rate of tax from 40% starting next year!! Here is a link to give you a guide of the IHT rules. https://www.gov.uk/inheritance-tax