Recently implemented legislation has produced some potentially valuable benefits for Britsh expatriates working in Asia who have built up savings and investments that they will rely on in the future. But only if action is taken….
As you may be aware, UK inheritance tax is charged at a rate of 40% on the world-wide estate of any individual who is domiciled in the UK for inheritance tax purposes. A ‘nil rate band’ of GBP 325,000 applies, though this is reduced (broadly) by the value of non-exempt gifts made within the 7 years prior to death.
Exemptions can exist on the transfer of assets between spouses and to certain registered charities and political parties. Exemptions can also exist for assets which qualify for Business Property Relief or Agricultural Property Relief. However, in the vast majority of cases, the whole of a person’s estate is liable - real estate, investment assets, personal chattels, certain life assurance pay-outs and cash on deposit.
The rate of charge is 40%, so that an estate of a single person worth GBP 2m would attract an inheritance tax charge of GBP 670,000 – an effective rate of tax of 33.5%. On an estate of GBP 1m, it is barely lower at 27%.
In the same way, should a UK domiciled individual return to the UK, they will become liable to pay income and capital gains tax on world-wide sources from the point of arrival in the UK. Rates of UK income tax can be as high as 50% and capital gains tax is charged at up to 28%.
However, Brits working in Asia who have saved and continue to invest for when they will no longer be working now have an opportunity to protect their wealth from inheritance tax and should they return to the UK in the future, income tax and capital gains tax. This relatively recent planning opportunity has come about from new legislation and is best suited to individuals who have amassed upwards of GBP 500,000.
Should you wish to learn more about how such tax planning can be achieved, please contact The Fry Group, who will be happy to discuss and review whether it would be appropriate to your individual circumstances.
The Fry Group has advised British expatriates on UK tax, wealth management and succession planning since 1898. Headquartered in the UK, the group has regional offices in Hong Kong and Singapore.