Inheritance Tax - IHT
Inheritance Tax for British Citizens Residing in Dubai
If you are a British citizen domiciled (where his or her permanent home is situated and not your current residency) in the UK, which is the case for the majority of British Expats living in Dubai, the UK Inland Revenue will take into account your WORLDWIDE assets when calculating your Inheritance Tax (IHT) liability on death. Expat Wills can write your will to include your world-wide assets.
- UK Inheritance tax is affecting more UK citizens each year. This is largely due to the rise in residential property values. The UK Inland Revenue inheritance tax (IHT) nil rate band is currently £325,000 (2009/2010) and depending on the value of your house and including your other assets this may not be that big an allowance. If you die leaving an estate worth more than £325,000 and you have no spouse, your estate will be charged IHT at 40% on the balance.
- Both you and your spouse have a nil rate band of £325,000 each. If one spouse dies before the other the remaining amount of nil rate band not used may be passed on to the widow. Therefore if one spouse dies without needing to use any of his/her nil rate band, the entire £325,000 is added to the widows nil rate band resulting in a nil rate band applicable to the widows estate upon death of £650,000.
- Even if you do have a spouse to inherit your nil rate band then this only puts off the time when tax will be payable because he or she will also pass away one day. It is worth doing some forward planning with a tax adviser to decide whether it would be appropriate to gift some of your estate, perhaps to children or other relatives, during your lifetime; or possibly redirect assets up to the value of the nil rate band into a trust on death.
- One thing is for sure with all forms of tax; if you do nothing the government will use its considerable powers to make sure a share of your hard earned wealth ends up in their coffers.
- Levels, bases of, and relief from taxation, are subject to change.
- If you live in one country but are domiciled in another, usually the country of your birth, you should have a valid Will for each country. The second Will to include your foreign assets. The distribution to your heirs of movable assets (such as bank deposits or investments) is governed by the law of your domicile country.
- The distributions to your heirs of immovable assets (such as property) are governed by local law. The ruling of a court in the country of your domicile relating to a house overseas will not be effective in the overseas country until a court in that country has approved it.
- The court may also require a local grant of probate or letters of administration. This procedure can take a long time and be costly.
- There are many differences in law between countries for example, in certain countries your children are legally entitled to inherit a specified portion of your assets and 'inheritance tax' liability is determined by the relationship of heirs.
- The often complex administration of expatriate and overseas residents' assets can result in trouble and legal costs payable in more than one location. However if you properly arrange your affairs in advance the problems and cost incurred by those looking after your estate will be a tiny fraction of those they would have incurred if you had not made a will. So if your assets are in more than one country you owe it to those you have trusted to look after your affairs to make proper arrangements now, even if this does mean writing more than one will.
- Expat Wills can write your will for you to include your world-wide assets and our services do not include just wills but a range of inheritance related advice.