For many years non-UK residents or non-UK domiciled individuals have invested in UK property but as they were not part of the UK tax mechanism, did not need to consider the potential cost of tax payments. This has recently changed.

Introduction of Inheritance Tax on Enveloped Dwellings

Since the introduction of the Annual Tax on Enveloped Dwellings (ATED) several years ago, many non-domiciled UK residents and Foreign Nationals have to pay an annual tax for UK property owned abroad. As this is substantially less than inheritance tax, many property owners have been happy to pay it.

In 2017 the Government is now including Inheritance Tax on Enveloped Dwellings, meaning all UK property that is owned outside of the UK will be required to meet the annual charges AND Inheritance Tax. UK residential property owned by non-natural persons (NNPs) now has a potential tax liability which nationally could be as much as £50 billion.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

What cover is suitable for me?

If appropriate, the property can be de-enveloped saving the Annual Tax and leaving the Inheritance Tax. Advisers should be turning to non-investment life insurance as a vehicle to protect this liability in the event of death, however, with limited market knowledge, only a few advisers can place this business with confidence.

Most life insurance companies require a person to be a UK resident and therefore liable to UK tax, making it very difficult to find insurance for non-domiciled and/or non-UK residents. This has meant many are looking at liquidating assets rather than searching for protection.

Life insurance can be used to protect potential IHT liabilities created by purchasing UK property or by unwinding existing structures. Although we cannot advise on how much cover should be purchased, we can provide a solution to the liabilities created by these tax changes.

Generally speaking, the minimum level of cover available is £1 million or has a minimum premium of £100 per month. Subject to occupation, country of residence and the location of the home, policies are available.

If you are a non-UK resident or a non-UK domiciled expat with property in the UK or you have clients that do, this is a subject that will need addressing. Please contact us to review your position.

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