The tax curse of our times for UK families is inheritance tax due at a rate of 40% on all your hard earned wealth. It is the fastest rising tax take in the UK with £2.3 billion inheritance tax paid in the first quarter of 2023 alone.
Some people avoid planning – then family ends up paying. A massive £400,000 of inheritance tax is due on an estate with property and investments valued at £1,000,000. The sad thing is inheritance tax is a voluntary tax only paid by those who dislike their family more than the UK Taxman at HMRC.
There are allowances up to £1m in the UK, but allowances are limited for expats to £650,000 for a married couple on second death or £325,000 for a single person.
UK Inheritance tax is due within 6 months of the date of death.
The art of kicking a person when they are down is one that has been practised diligently by the Inland Revenue with some excellent results especially among those who cannot speak for themselves – like the recently deceased.
When your spouse or parent dies, the handing over of a vast sum of money to pay the inheritance bill is not exactly the most comforting part of the grieving process.
Time Spent
Losing a loved one and facing death can be incredibly challenging for family and friends. Grief can bring about deep emotions, sadness, and a sense of loss that can seem overwhelming at times. Death represents the end of a person’s physical presence in our lives, and this can be difficult to come to terms with.
Meanwhile the family is trying to organise funerals and memorial services, reorganise daily life and bills, as well as administering the estate.
Unless you have planned ahead then simple solutions are not available and time is needed to release bank account funds & investment accounts, transfer ownerships of shares, cars, and other possessions – BUT before all that first pay all the debts, taxes and inheritance tax due.
Note this could mean a forced sale of a family home to raise cash to meet the expenses.
Expats in Cyprus must also consider a Probate Administration cost and/or Property Agent Sale costs – chargable amounts written into Cyprus law.
Expats dying in Cyprus are required to settle their worldwide estate from Cyprus.
Consider an ‘average’ time for a probate administration in the UK is 9 months and should be completed in 2 years.
Therein lies another complexity …. if you have across borders bank accounts, investments, shares, widow’s pension, property, business shares – you then need to apply for a second administration in that country.
Affairs could drag on for 2, 3 or more years.
Coming Home to Roost Tax
There is no inheritance tax in Cyprus, completing your worldwide estate here requires tax clearance to pay only the lifetime and capital taxes due. Thats it for Cyprus.
For UK expats it doesn’t end there. A key feature of any probate administration is tax clearance for any assets, this is called an inheritance tax return.
Even if there are no UK assets, then exchange of information informs the UK. Any probate administrator needs to surrender the passport of the deceased and cancel pensions and savings – all of which a tax reporting agents to HMRC.
The spectre of Inheritance tax remains over expats living and working abroad, and with anti money laundering regulations being forever tightened even more people will be scooped up into the UK Inheritance tax take.
Planning Ahead
The simplest thing to do is to make an online Will, at least you create a template for the family to sort your affairs.
In practice you could take advice to organise your affairs of estate. Administrative actions and notices prepared and issued while you are alive kick back the potential delays with bank and investment accounts, maybe even avoid the need for a probate administration on assets.
A detailed Will with professional advice from expat experts can give clear and tax efficient directions to family administrators with cost and tax saving to the probate estate administration.
ProACT offer a safe storage service for your Will & Instructions so they are no lost or stolen while travelling and can be accessed from a secure 3rd party location when a death or accident happens and next of kin are in another country.
The next step in planning ahead is give it all away. A lifetime family gift can be organised in a way to retain control, avoid inheritance tax and the cost and delay of probate.
ProACT Know How.
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