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Tax Tips for Inheritance Tax on Overseas Property

Securing your child’s future by purchasing an overseas property is not a bad idea. Apart from improving your living standards, you can also go for a foreign property for your children and grandchildren. The overseas property will help them open up different opportunities and encourage them to invest in something like this for their family members.

A Complete Tax Guide for Those Who Are Having Foreign Property

Overseas property can be a secure source for your children, but you might be liable to different taxes you need to pay, just like any other property inside the UK. The most common tax on any property is inheritance tax (IHT). Others may also include revenue enhancement tax or income tax. Proper tax guidance is required to transfer your savings to the next generation without any deductions!

If your principal residence is abroad, then you don’t pay inheritance tax on your UK assets like property or any bank account in the UK. Inheritance tax is not applicable on excluded assets like foreign currency accounts with a bank, overseas pensions, and holdings in authorized unit trusts or open-ended investment companies.

“If your principal residence is abroad, then you don’t pay inheritance tax on your UK assets.”

HMRC will treat you as a UK resident when you have lived 15 of the last 20 years inside the UK or had your permanent home in the UK at any time during the previous three years. Only then will inheritance tax get applicable. So, if you don’t live in the UK in the given time range, you can escape from the inheritance tax liability.

It is crucial to consider that IHT gets applicable to UK residents. In contrast, on the other hand, the non-UK residents are not liable to the IHT, and it is considered an excluded property from their liabilities. When someone dies owning an overseas property, the assets are transferred to the heirs.

“The non-UK residents are not liable to the IHT, and it is considered an excluded property from their liabilities.”

 No matter if they were inside the UK or outside it. Some of the critical things while considering Inheritance tax for overseas property are as follows.

The foreign currency is different from the UK currency, that is, the pound sterling. Inheritance tax might exceed the given amount due to a change in currency values. It might go in another way as well. If the foreign country’s currency is higher in value than the UK s currency, you can automatically cover the tax due to the difference in currency amount. In the event of the depreciation of sterling, an increase in IHT will arise even if no appreciation of the property in foreign currency terms has occurred.

“Inheritance tax might exceed the given amount due to a change in currency values.”

According to the local tax system, the country where y our property is situated might get liable for the inheritance tax. As a UK resident, you might get caught under nets. In this case, you should look for double tax relief that will allow you to be in peace regarding one net.

This relief will allow you to enjoy an unavoidable deduction in tax amount because you have been paying on both sides. While this relief gets applicable, you might experience an arising net UK inheritance tax charge due to an inevitable depreciation in sterling. Of course, the currency game is still going on over here.

If the overseas property is your real estate, then it should be subjected to a mortgage. Labilities to inheritance tax can be calculated on the death of the deceased. These liabilities can be reduced by considering the quantum of the estate. Penalties assessed against the overseas property should be deducted against a mortgaged property. It will result in a reduction of inheritance tax liability attributed to property on death. Also, it will not allow non- UK residents subjected to inheritance tax on UK assets to reduce their UK state by these overseas liabilities.

The country you are considering for overseas property should be very consciously decided because every country has its own rules and regulations. You will have to pay tax according to their requirement. Many of the overseas countries have a “Forced Heirship” Law. It affects the UK inheritance tax charge. A person can transfer his overseas property to his partner as an inter-spouse transfer. No Inheritance tax gets applicable under such conditions. But if you are going your property for your children, then a UK inheritance tax charge gets applicable. It will be an escape door for you to completely transfer your overseas property in the form of a house or any other thing without any deductions to your next generation!

“The country you are considering for overseas property should be very consciously decided because every country has its own rules and regulations.”

If it is imperative to buy a foreign property for inheritance purposes, try to invest in more than one country. Investing in more than one country will allow you to adopt the benefits of one country. It may also compensate for the tax charged in your own country. Therefore, you should choose a state wisely. It would be best to adopt proper tax guidance before selecting a country and buying a property for inheritance purposes. Being an overseas property owner is not a big problem, but a change in currency can be a severe problem in this regard.

It is also advisable to own any overseas property through an intermediate source that will remove any UK IHT charge and circumnavigate any local forced heirship laws. You can help different trusts in structuring overseas property ownership that will help you in inheritance tax planning.

You can avoid inheritance tax on your overseas property by changing your country of domicile way from the UK and selecting a nation according to beneficial currency requirements. You can also protect your assets from inheritance tax by moving your overseas property into tax-efficient financial structures. These economic structures may include setting up trusts for life insurance payouts, payment of gifts, and transferring your pension bag can help you avoid death transfer tax on overseas property.

Our tax experts can help you organize your IHT applicable assets into tax-efficient structures and consider them for a better and secured future for your heirs. Legend Financial can help you in this regard. Save money so that your children can enjoy a better lifestyle just only due to your one wise move.

sachin
He is a Blogger, Tech Geek, SEO Expert, and Designer. Loves to buy books online, read and write about Technology, Gadgets and Gaming. you can connect with him on Facebook | Twitter

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