Can moving abroad save your family from a 40 percent inheritance tax?
From April next year, most unused pension funds and death benefits will be included in inheritance tax, potentially leaving families with a bill of up to 40 percent.
With the £325,000 tax-free threshold frozen, more Brits are looking for ways to protect their wealth from the tax authorities – and for some that could mean looking beyond Britain.
There are several countries in the world where inheritance taxes do not exist or are significantly lower than in Great Britain.
But could packing your bags really protect your estate from the tax authorities?
These are the countries Brits might consider if they want to avoid inheritance tax – and what you need to know before you make the move.
Australia abolished inheritance tax in 1979, but other charges may apply
Australia
Australia has no inheritance tax since its abolition in 1979.
However, residents who inherit property from a deceased person may be subject to taxes.
According to the Australian Taxation Office, capital gains tax applies when a person disposes of an asset inherited from an estate.
Income tax is also levied on rental income or dividends earned from inherited shares or real estate.
New Zealand
In New Zealand there is no inheritance tax system for transferring assets after someone dies.
Neither the beneficiary nor the estate will be charged inheritance tax or stamp duty, Wise explains.
However, there are some circumstances where charges may apply. This also applies when the beneficiary sells inherited property and the person it was inherited from intended to sell it and make a profit from it.
If the house is sold for a profit and the original owner’s intentions are carried through, taxes may be levied.
Singapore
Inheritance tax, which refers to a levy on the total market value of a person’s assets when they die, was abolished in Singapore in 2008.
“The majority of estates are not subject to inheritance tax as various exemptions have been granted,” the Inland Revenue Authority of Singapore said.
The country is generally referred to as a tax haven and the top personal tax rate is 24 percent for those earning more than S$1 million (£577,080).
There has been no inheritance tax in Singapore since 2008
Slovakia
There is no tax on inherited assets in Slovakia, which abolished such charges in 2004. The country also does not apply wealth, wealth or gift taxes.
However, if the beneficiary sells a property he has inherited, he may be subject to capital gains tax if he has owned it for less than five years.
Sweden
Sweden has no inheritance, gift or inheritance taxes. Since 2005, Swedish residents no longer have to worry about their heirs being sued.
However, there are some other taxes to consider, such as capital gains which are 30 percent. Taxes also vary between non-residents and residents.
Austria
Austria is another country where there is no inheritance or gift tax, and this tax was abolished in 2008.
However, the Austrian government is actively debating the issue and a tax could potentially be reintroduced in the future. Experts in global law reports.
Canada
There is no such thing as inheritance tax in Canada, but other taxes may come into play.
Asset transfers after death can be treated as a sale and therefore the increase in value may be subject to capital gains, No More Tax explains.
There is no such thing as inheritance tax in Canada
Hong-Kong
Hong Kong scrapped inheritance taxes in 2006, which worked in the same way as inheritance taxes.
According to the country, the country does not impose taxes on gifts, or wealth/value No more taxes. In most cases, only income from Hong Kong can be taxable.
Mexico
Under Mexican law, there are no federal or state inheritance taxes, but other fees may still apply.
Inheritance is treated as income, but is exempt from income tax if received by a Mexican resident.
If it is received from a spouse, ancestors or lineal descendants, it is also exempt, according to PWC.
Macau
There are no estate or inheritance taxes in Macau. There is also no general gift tax.
But stamp duties may apply on the transfer of real estate.
Hong Kong abolished inheritance tax in 2006 and does not impose taxes on gifts or wealth/value
Can Brits benefit from moving to countries without inheritance tax?
Despite how tempting the tax laws in different countries can be, Brits moving abroad may still not be exempt from UK IHT. Member of Parliament for Estate Planning explained.
Inheritance tax in Great Britain depends on whether a person is a long-term resident.
A long-term resident is defined as having lived in the United Kingdom for at least 10 consecutive years out of a total of 10 years or more in the previous 20 tax years. If this is the case, they may be subject to IHT.
Assets located in the UK may be subject to IHT. For example, if you move to Australia but still own a home in the UK, this may not change anything from a tax perspective.
IHT is also applied to assets owned abroad or on death where the person is a long-term resident of the UK.
The UK government outlines how IHT will not be charged on trust assets placed into the trust while the person was not resident in the UK, abroad on 30 October 2024 or abroad on the date of death or when their rights to the trust ended.
The problem of double taxation can also arise in countries such as Sweden, France and America. It can often be avoided if the country has a double taxation agreement with Britain, but it is still another problem that needs to be solved.
With the different taxes, regulations and residency issues, the experts recommend looking at your legal options at home for a more certain way to protect your assets from UK IHT rather than moving.
