Uk Inheritance tax (IHT) on supporting my girlfriend.

[Griffo63]

This article is worth a read - quite complicated though https://taxscape.deloitte.com/insights/article/inheritance-tax--non-uk-domiciled-spouses.aspx#:~:text=The UK domiciled individual can give or leave assets worth,civil partner free of IHT.

[Liverpool Lou]

8 hours ago, noobexpat said:

13 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.

Expand  

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.

When I specifically refer to non-intestate situations, why would I need to consider to those who die intestate!?     

Why do you assert that beneficiaries "have to set up bridging loans"...that is nonsense in relation to IHT liability.   If I am a beneficiary of an estate that is subject to IHT, I do not "have to get a bridging loan".  

Edited October 7, 2023 by Liverpool Lou

[Chongalulu]

8 hours 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. 

You have overlooked taper relief which kicks in after 3 years .

Taper relief

Years between gift and death	Rate of tax on the gift
3 to 4 years	32%
4 to 5 years	24%
5 to 6 years	16%
6 to 7 years	8%
7 or more	0%

[Liverpool Lou]

8 hours ago, noobexpat said:

Are you confusing this with gifts to charity.

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

No, I am not.

[Phulublub]

19 hours ago, topt said:

 

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

Difficult to report back success or otherwise of any scheme after you have passed on!

 

PH

[Phulublub]

2 hours ago, Vibora99 said:

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…

Such a shallow and unnecessary comment.  There are many Thai/Falang relationshiops that are genuine; just becasue you choose to rent some false affection does not mean that applies to everyone.

 

PH

[Homburg]

21 hours ago, davee58 said:

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. 

If your "family support" payments come from your income, not from capital, then these are normally exempt.  Do you have a link for the exclusion of gifts made to a non-UK domiciled person from the 7 year exemption?  

[jimn]

This is a helpful link

 

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#whopaysitax

[Chongalulu]

1 hour ago, Griffo63 said:

This article is worth a read - quite complicated though https://taxscape.deloitte.com/insights/article/inheritance-tax--non-uk-domiciled-spouses.aspx#:~:text=The UK domiciled individual can give or leave assets worth,civil partner free of IHT.

Have to say,that was a very useful read and perfectly understandable with a bit of concentration ???? 

[Chongalulu]

14 minutes ago, jimn said:

This is a helpful link

 

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#whopaysitax

A good site but not relevant for the aspect of non domicile covered here. 

[topt]

1 hour ago, Griffo63 said:

This article is worth a read - quite complicated though https://taxscape.deloitte.com/insights/article/inheritance-tax--non-uk-domiciled-spouses.aspx#:~:text=The UK domiciled individual can give or leave assets worth,civil partner free of IHT.

 

26 minutes ago, nchuckle said:

Have to say,that was a very useful read and perfectly understandable with a bit of concentration ???? 

Credit where it is due. The OP already posted this link on the first page of the thread.

19 hours ago, davee58 said:

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

 

[topt]

1 hour ago, Phulublub said:

Difficult to report back success or otherwise of any scheme after you have passed on!

 

PH

I was referring to someone applying to HMRC to change their domicile from the UK prior to that event.....or did you miss the first part of my post.......

[Robin]

Another piece of advice;  never trust friends or relatives to act a executors, get your non-involved solicitor to do this.  People behave very strangely when there is money involved.  The more money, the worse they behave.

Also I found that to become non-domiciled in UK was not easy, I would have had to cut all ties with UK.  I thought that too much effort and continue to pay UK tax on unearned income.

Unqualified advice given to me;  " Get all your money as far away from the UK Chancellor of the Exchequer as possible"

Now we have Srettha to worry about as well.

[noobexpat]

1 hour ago, nchuckle said:

You have overlooked taper relief which kicks in after 3 years .

Taper relief

Years between gift and death	Rate of tax on the gift
3 to 4 years	32%
4 to 5 years	24%
5 to 6 years	16%
6 to 7 years	8%
7 or more	0%

No, thats not how its applied.

Taper relief is applied when there is an accumulation of gifts over the previous 7 years (can be 14 years) that subsequently then exceed the NRB.

Relief is given to the tax bill ...not the actual gift.

 

[Homburg]

10 hours 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. 

It does not count as a PET if the person making it retains any interest.  If she is still living in the house then she must pay a "commercial rent" in order for HMRC to accept that she does not retain an interest in the property.  

[noobexpat]

3 minutes ago, Homburg said:

It does not count as a PET if the person making it retains any interest.  If she is still living in the house then she must pay a "commercial rent" in order for HMRC to accept that she does not retain an interest in the property.  

Correct ...it would be called a gift with reservation

 

Also the local council would be interested if there was a care home situation as it could be classed as 'deliberate deprivation'.

Edited October 7, 2023 by noobexpat
Clarify

[Chongalulu]

10 minutes ago, noobexpat said:

No, thats not how its applied.

Taper relief is applied when there is an accumulation of gifts over the previous 7 years (can be 14 years) that subsequently then exceed the NRB.

Relief is given to the tax bill ...not the actual gift.

 

That is a direct copy paste from HMRC website,so guess it is how it works. So everything over the allowance plus any gifts within the 3years gets taxed at the full 40% and those between 3 and 7 years taxed at the rate shown on the table.

[noobexpat]

40 minutes ago, nchuckle said:

That is a direct copy paste from HMRC website,so guess it is how it works. So everything over the allowance plus any gifts within the 3years gets taxed at the full 40% and those between 3 and 7 years taxed at the rate shown on the table.

However you think this works ...its far more complicated.

When assessing IHT there is a priority order that has to be followed. The outcome determines if any taper relief applies...

 

Order of gifting

10 January 2023

Key points

• Lifetime gifts are taxed at 20% if the nil rate band has already been used up by chargeable transfers in the previous seven years
• A chargeable lifetime transfer can affect other gifts in the cumulation for up to 14 years before death (the 14 year rule)
• Chargeable transfers including failed PETs in the seven years before a trust is created can reduce the available nil rate band for periodic charges

[DaLa]

Anyone have any advice (other than “get married’) to this conundrum

 

The Deloitte advice is that IHT is not payable up to assets of £325,000 by Spouse or civil partner.

 

I’m not married to my (Female) Thai partner of 14 years.

 

One definition (CAB UK) of a Civil Partnership: 'A civil partnership is a legal relationship which can be registered by two people who aren't related to each other. Civil partnerships are available to both same-sex couples and opposite-sex couples. Registering a civil partnership will give your relationship legal recognition'.

 

Furthermore CAB UK states that there is recognition for partnerships formed overseas.

 

However:

HMRC (Civil Partners: SET 04) 'A civil partner is a person who has legally registered his / her partnership with another person of the same sex.'

 

Clear as mud...as usual.

 

Should I get my partner to change sex?

[SportRider]

On 10/6/2023 at 8:20 AM, davee58 said:

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.

You need specialist advice from someone who takes time to understand your circumstances and objectives and propose the best solutions.  This could be someone with more relevant experience than a typical high street accountant.

 

Solutions can include QNUPS and Discounted Gift Trust.  Both move assets outside of your estate.  The latter creates an income stream for you as well.

 

They sound complicated if you are unfamiliar, but a good practitioner will make the process straightforward.

[SportRider]

11 minutes ago, SportRider said:

You need specialist advice from someone who takes time to understand your circumstances and objectives and propose the best solutions.  This could be someone with more relevant experience than a typical high street accountant.

 

Solutions can include QNUPS and Discounted Gift Trust.  Both move assets outside of your estate.  The latter creates an income stream for you as well.

 

They sound complicated if you are unfamiliar, but a good practitioner will make the process straightforward.

Link on DGT

https://www.roywalkerwealth.com/2019/09/beat-IHT-taxman-with-discounted-gift-trust.html

[Phulublub]

2 hours ago, topt said:

I was referring to someone applying to HMRC to change their domicile from the UK prior to that event.....or did you miss the first part of my post.......

Apologies; I had.

 

PH

[Scott Tracy]

On 10/6/2023 at 5:20 AM, davee58 said:

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.

You are kidding, right?

[noobexpat]

16 minutes ago, Scott Tracy said:

You are kidding, right?

An accountant cannot even setup most IHT plans because they won't be regulated under the correct FCA controlled function - CF30 ??

 

An accountant will make a referral to their in-house or external financial adviser.

 

[twix38]

I know a fair bit as a layman and as done both parents probate and IHT. Fathers in Thailand without a Will and both parents in UK.

Don't forget your RNRB Residential Nil Rate Band allowance on your property if it's your principle private residence. This adds £175,000 to your £325,000 IHT allowance.

 

As current legislation allows

Edited October 7, 2023 by twix38
Update

[persimmon]

Ideally , the executor should also be the main beneficiary . IME , it`s all too easy for the executor to " forget " to pay all the beneficiaries . Also , be careful about making a solicitor the only executor - some will only do the job on a " time " basis . Doing this is similar to giving them a blank cheque to spend as long as they like , and at £ 250 - £ 300 per hour , it could take quite a chunk out of the estate .

Also , something that hasn`t been mentioned - pensions can be inherited free from IHT , although if the beneficiary is not a UK resident , this might be a complication ( I tried to get more detail on this but haven`t been able to get a definitive answer yet ) .

Edited October 7, 2023 by persimmon

[noobexpat]

56 minutes ago, persimmon said:

Also , something that hasn`t been mentioned - pensions can be inherited free from IHT , although if the beneficiary is not a UK resident , this might be a complication ( I tried to get more detail on this but haven`t been able to get a definitive answer yet ) .

Pensions are written under a master trust and whilst not assessable for IHT , post age 75 death benefits can attract a 45% charge. Typically its the beneficiaries marginal tax rate though.

 

Its not a complication, because it does not apply.

 

[MrBanks]

The main difference between you and I is that you are not married to your lady, I am married to mine, however, there are similarities in our situation.

I am currently going through a similar exercise, here is what I have discovered and the path I am following:

Firstly, even if you marry, as your girlfriend is not a UK citizen, the only part of your wealth that she can inherit tax free is the first £325,000.00, everything after that is subject to 40% IHT.

 

I am married to a Thai citizen, in order for her to inherit tax free I can:

1. Help her become a UK citizen, meaning going back to live there for at least 5 years etc……….. not going to happen!

2. I can become non-domiciled, do not confuse non resident with non-domiciled, they are 2 very different things when it comes to HMRC.

There is 1 huge snag with this path and that is HMRC will not make the final decision on your domicile until after you pop your clogs.

You can do all you that you can, but if they determine that your “heart” never really left the UK, they will class you as UK domiciled.

If you want to try that path it is essential to get advice from an expert lawyer, also make sure that you formally state in your will that you want your body / ashes disposed of in the foreign country that you are residing in.

The classic example that is used to demonstrate this is the case of Richard Burton, the famous actor. He lived outside of the UK for 20 or so years, his life was based totally abroad. When he died his estate was £5,000,000.00, which his benefactors believed would be tax free.

it turned out that he had bought a burial plot in Wales and his wishes were to be buried there, apparently (allegedly), that was enough for HMRC to decide that his “heart” had never left the UK, he was still domiciled there (in their opinion), his estate got clobbered for 40%.

 

I was going down the non-domiciled path, however, I then found out about QNUPS, which another poster has mentioned.

For an over view of QNUPS, check out this link.

https://www.expertsforexpats.com/expat-resources/british-expats/finance/qnups-for-british-expats/

Please note, I am not a financial advisor, I am just sharing my experiences

Please also note that I am not recommending the people in the link, I am sharing that to give you insight into QNUPS, I have not contacted them.

 

 I believe that you will find that if you choose the QNUPS path, you will be able to eliminate your IHT worries.

I am not certain if you have to be resident outside of the UK to set one up, but once it is done you are allowed to live there, if you want.

 

The QNUPS that I am going with is with a company in Guernsey and I am being helped by a financial advisor.

I found my UK accountant to be of not much use in this matter (you need a specialist), my UK solicitor, whilst being knowledgeable about it, could give no guarantee that no matter what we did that HMRC would not go after my estate once I was gone.

 

Good luck, I hope what I have shared is helpful and gives you food for thought and an alternative to explore.

 

 

 

[Dene16]

On 10/6/2023 at 7:47 AM, davee58 said:

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.

You need to be very careful when making a lawyer or solicitor an executor of your will.

when they tried to persuade me to do so under the guise of it would be in my best interests. i asked them what was their cost of which they said 6%

That was going to be a minimum of 30k plus what i would inherit when my parents passed  just for sending out a few letters and someone spending a few hours checking if you have no tax liabilities. Thousands of people do it every day so it cant be that hard and it is all explained on the gov.uk site.

If this was a problem i have no doubt there would be examples of this everywhere . Surprisingly the tax office although a law unto themselves would see that she was a dependant and unless they could see it was a clear attempt to avoid inheritance tax would not be interested

From a inheritence tax site 

• Payments that are aimed at helping another person’s living costs can also be exempt from gift tax. The recipient of this type of gift might be an elderly relative or a child who’s under the age of 18.

So whoever is the executor would claim that it was support payment for a dependant and therefore does not need to be mentioned as a gift

Obviously check for yourself but i think you are worrying over nothing

Edited October 8, 2023 by Dene16
spelling

[retarius]

With the Thai tax changes due next year, I'm thinking of becoming non tax resident ie spending less that 180 days a year here. I have a residence in another country and so spending time outside here is relatively easy. 

The other thing I am thinking about doing it to renounce my US passport and use my US passport for entry/exit into Thailand. If I die here then the hospital will notify the US embassy instead of the UK embassy. I have no assets to speak of in the UK now and will transfer all over here before the end of the year, leaving all my assets in the US, Thailand and a third country. 

I will also apply to change my domicile from the UK as I have not lived there for over 40 years, will have no assets there, and no close relatives.