Tax Planning
Living outside the UK whether in the Isle of Man or elsewhere normally involves a different tax regime and hence a different set of rules to be adhered to. It is important to make full use of any personal or corporate allowances available for income and capital gains.
Inheritance Tax (IHT) is the tax levied on the value of an estate on death if it exceeds the nil rate band. Your estate is the value of all your assets e.g. house, investments, car, furniture, cash etc. Whilst UK IHT is only applicable to UK domiciled individuals or where non-UK domiciled individuals have UK situs assets, other countries have their own version of IHT with their own, usually very different, rules. There is no version of IHT in the Isle of Man. The rules applying to domicile are open to many interpretations so for anyone born in the UK, and/or who has moved permanently to a country different from their birth, it is essential specialist advise is sought. So for the many Isle of Man born individuals who move to the UK following University for example, inadvertent acquisition of a UK domicile of choice clearly have a potential problem
The current nil rate band in the UK for the tax year 2011/2012 is £325,000. This is the first slice of your estate which is taxed at 0% hence the name nil rate band. The value of everything you own above this amount is taxed at 40%. IHT normally has to be paid within 6 months of death otherwise interest is charged on the amount owing. There is no IHT due if all assets pass to a UK domiciled spouse. Additionally on 2nd death any usused IHT allowance may be passed on from the death of the 1st spouse.
Given that many homes are now valued in excess of the nil rate band IHT is no longer a tax affecting only the wealthy.
There are many methods of reducing the liability that your beneficiaries may need to find and planning is essential. Doing nothing is not an option if you wish to save paying IHT.
Planning methods can include any, or a combination, of the following:
- Holding properly drafted Wills
- Making use of exempt beneficiaries
- Making use of exempt transfers
- Ensuring Life policies are written in Trust
- Placing funds in Trust
- Potentially Exempt Transfers
Solutions are individual and whilst we can provide bespoke independent financial advice to help you reduce your tax liabilities we are not tax advisers. However we can work with your chosen professionals in this field to optimum effect or we can arrange an introduction to a suitably qualified practitioner if required. Please contact us for a confidential review.