Trusts and Inheritance Tax

Domicile for UK inheritance tax

Produced by Tolley
  • 03 Nov 2021 11:52

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Domicile for UK inheritance tax
  • The significance of domicile
  • The general law
  • Domicile of origin
  • Domicile of dependency
  • Domicile of choice
  • Resident in the new country
  • Intention
  • Evidence
  • Deemed domicile

Domicile for UK inheritance tax

The significance of domicile

Liability for UK inheritance tax depends on a person’s domicile. In contrast to other taxes such as income tax, capital gains tax and corporation tax, liability to IHT is not primarily determined by residence in the UK (although, a person’s domicile status may be informed by their residence status). This note explains how domicile is determined for IHT purposes and how it affects the liability to tax.

All references to spouse include a civil partner.

An individual who is UK domiciled or deemed domiciled will be subject to IHT on all their worldwide assets, while an individual who is not UK domiciled will be liable to IHT only on assets located in the UK. Non-UK assets to which an individual domiciled outside the UK is beneficially entitled are excluded property for the purposes of UK IHT and will not be included in the individual’s chargeable estate.

See the Excluded property and situs of assets guidance note.

Transfers of UK assets from a UK domiciled spouse to a non-UK domiciled spouse are chargeable to IHT once they have exceeded a lifetime limit. This is in contrast to the unlimited exemption which applies to transfers between spouses where the donee spouse is UK domiciled. The lifetime limit has been £325,000 since 6 April 2013 and it is expected to remain in line with the level of the nil rate band in the future. Non-UK domiciled spouses have the option of electing to be treated as UK domiciled, which means that they gain a total exemption on property transferred from their spouse instead of being subject to the lifetime limit.

See the Transfers to a non UK domiciled spouse or civil partner guidance note.

An individual may be domiciled in the UK under general law, or under the deemed domicile rules. Both of these sets of rules are outlined below. The deemed domicile rules were changed with effect from 6 April 2017. For a

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