What Inheritance Tax liability do non-domiciled residents have in the UK?


Woman writing down inheritance tax

When someone is classed as being domiciled outside of the UK, Inheritance Tax will only be payable on their UK assets.

A person’s domicile is usually their home or permanent place of residence.

However some people may claim the place that their father was born as their domicile, or if their parents were unmarried, then the place of their mother’s birth.

Even if someone was born, educated and works in the UK, it is still possible for them to be a so-called ‘non-dom’, ie. not domiciled in the UK. There are rules requiring an annual remittance to be paid to HMRC each year from the seventh year of residency onwards, but by way of benefit non-doms can avoid paying tax on foreign income or gains, provided the money is not brought to the UK.

Inheritance Tax benefits for non-doms

This benefit also extends to UK Inheritance Tax liability. Property outside of the UK can be excluded when calculating Inheritance Tax liability if the deceased was classed as a non-dom at the time of their death. For those classed as domiciled in the UK, Inheritance Tax is payable on all assets, wherever in the world they may be situated.

Property excluded from Inheritance Tax payments

  • Property situated overseas
  • Property situated overseas and held in trust where the settlor was not domiciled in the UK
  • Foreign currency bank accounts
  • British government securities, national savings and War savings certificates

How to benefit from non-dom status

If you have non-dom status, then by setting up an excluded property trust such as a discretionary off-shore trust can protect your assets from UK Inheritance Tax.

If the discretionary off-shore trust is set up whilst the owner holds non-dom status, it would become extremely beneficial if and when the person becomes UK-domiciled at a later date.

By setting up an excluded property trust, assets will not attract Inheritance Tax even if the settlor then acquires UK domicile.

To talk to one of our experts about tax planning, call us on 01276 415835/6/7.


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