Unlike Australia, the UK government may impose inheritance tax of 40% on the value of an individual’s worldwide estate. Many UK expats living in Australia have historically been caught by UK inheritance tax because they hold UK assets at their death or based on their domicile status.
Earlier this year, the application of UK inheritance tax was changed from a domicile to a residence-based system.
When does UK inheritance tax apply?
UK inheritance tax applies to individuals who have been a UK resident for at least 10 out of the last 20 tax years and to the value of their estate above the £325,000 threshold.
A UK inheritance tax ‘tail’ of between 3-10 years applies to individuals after their departure from the UK.
Is anyone exempt from UK inheritance tax
An estate passing to a spouse or charity may be exempt from some or all UK inheritance tax. Obtaining specialist legal advice is recommended as any exemption will depend on the circumstances.
What are the implications for an Australian estate
If the individual died in Australia, a reseal of the grant of probate may be required to administer UK assets and/or pay any UK inheritance tax. This process can cause substantial delays to the administration of the estate and prolong the payment of distributions to beneficiaries.
How can I best prepare for potential UK inheritance tax on my estate
Wholistic estate planning advice is key when managing UK inheritance tax on a worldwide estate. Such advice involves careful consideration of an individual’s circumstances and putting in place an appropriate estate planning strategy. This may include the use of wills and trust structures in both the UK and Australia.
Please contact a member of the de Groots team on how we can best assist you.
1300 408 766
Brisbane: (07) 3221 9744
Sydney: (02) 9101 7000
Melbourne: (03) 9975 7321
Get started with one of our experienced estate planning lawyers
For practitioners: More on Wills Probate and Administration Practice (Qld)/Wills Probate and Administration Practice (NSW)
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Disclaimer
The content of this article is provided as general advice only. It does not replace comprehensive legal and tax advice, which should be obtained to assess any application of UK inheritance tax to your circumstances. While the author is admitted to practice in New South Wales, Australia, and routinely deals with UK-related issues, he is not qualified to give specific UK legal or tax advice.
