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As a British Expat in Spain – Is Doing Nothing About your Exposure to UK Inheritance Tax an Error of Judgement? Image

As a British Expat in Spain – Is Doing Nothing About your Exposure to UK Inheritance Tax an Error of Judgement?

April 25, 2023

As a British expat in Spain – Is doing nothing about your exposure to UK inheritance tax an error of judgement?


In this article we examine the financial consequences of not addressing your exposure to UK inheritance tax.


Inheritance Tax Revenues rising sharply

HM Revenue and Customs (HMRC) collected an extra £729M in inheritance tax receipts for the financial year 2021/22 an increase of 14% from the previous year raising £6.1 billion in revenue.


The UK Office for Budget Responsibility has forecast that for the financial year 2022/23 inheritance tax receipts will raise £6.7 billion in tax revenues.


The OFBR has also predicted inheritance tax receipts will increase by a further 24% to £8.3 billion by 2026.


The average UK inheritance tax liability per estate continues to rise sharply from £209,000 in 2019/20 to an estimated £266,000 by 2022/23.


A strong rise in asset values (including UK house prices) alongside the UK Government’s decision to freeze the level at which estates are exempt from IHT has dragged more people into the UK IHT tax net.


Deemed Domicile

As a result of recent changes to UK ‘deemed domicile’ provisions in April 2017 the conditions for those claiming non-domicile status have been tightened. Once you have passed away the burden of proof for any non-domiciled claims falls on your heirs.


Re-Triggering UK Domicile

You may have lived abroad for many years but your circumstances can change. It’s not uncommon for British nationals to return home if the spouse passes away or if they require medical treatment. If you return to the UK for more than a year your domicile of origin is reinstated and you become liable to UK IHT.


It’s a Voluntary Tax – What is stopping you?

Whilst HMRC is always looking at ways of increasing tax revenues; inheritance tax is a ‘voluntary tax.’ The earlier that you plan the more options you will have available to protect your estate from UK IHT; procrastinating will only tighten the taxman’s grip on your hard- earned money.


Many tax payers choose to do nothing – whether it is inertia or not feeling enough pain – is anyone’s guess. However, ignoring the problem doesn’t make the pain go away.


Doing nothing about UK Inheritance Tax deprives your loved ones from enjoying the fruits of your hard labour. You are basically gifting money to the UK Government rather than to your beneficiaries – why would a rational person not take steps to reduce their tax exposure?


Discover how we can provide you with the outcome you seek. For further information please email enquiries@fwm.gi or call us on Tel: +44 208 998 0570.


Our financial advisers are fully licensed, qualified and regulated to provide financial advice in Spain and across the EU.

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