Changes to UK domicile rules – do you know how you will be affected?

Happy family moving house and carrying boxes

Changes to UK domicile rules – do you know how you will be affected?

12:54 22 February in Blog

Looking to plan against UK inheritance tax by being resident abroad? Be careful – the rules are changing…

In the UK Summer Budget of 2015 (8 July 2015), the UK government set plans in motion to widen the UK’s ‘deemed domicile’ rules for inheritance tax. The importance of being UK domiciled is that you retain a liability for UK inheritance tax – even if you may no longer be living in the UK.

The new rules are expected to come into force from 6 April 2017 and will capture the following:

  • People resident in the UK who are not UK domiciled,
  • Individuals who were formerly resident in the UK but now reside abroad; and
  • Trusts created by people born in the UK and those with a UK domicile of origin at birth.
  • Some of the main proposed modifications to these rules include:
    • You may be deemed domiciled in the UK for inheritance tax if you have resided in the UK for at least 15 of the previous 20 UK tax years. This is more stringent that the current rule of 17 out of the past 20 UK tax years. Note that the UK tax year runs from 6th April to 5thApril the year following;
    • If you were born in the UK and had a UK domicile of origin, but have since acquired a domicile of choice in another jurisdiction, you will become UK deemed domiciled (for inheritance tax purposes if you are resident in the UK and have been resident in the UK in at least one out of the two previous UK tax years).

    These changes will have an impact on your planning if you have assets based in the UK, or possibly have transferred a pension fund abroad and drawn this out under rules of another jurisdiction.

    To discuss your situation and strategies available to help minimise your tax either call us, or email