In theolivepress.es, she explained: “Inheritance tax in the UK is based on the person’s estate and has a tax-free threshold of £325,000, plus generous allowances for your primary residence.
“In Spain, this is very different and works on a beneficiary-based system, where the tax-free amounts differ depending upon the relationship between the deceased and their beneficiaries – i.e., husband and wife, parent and child.
“It is much harder to mitigate against IHT in Spain, but there are ways to structure your assets to reduce the tax liabilities on death.”
Where people are not sure if their assets will be excluded, they should contact the inheritance tax and probate helpline for further assistance.
Officially, HMRC will treat a person as being domiciled in the UK if they either:
- Lived in the UK for 15 of the last 20 years
- Had their permanent home in the UK at any time in the last three years of their life
In late December, Boris Johnson announced a trade deal had been agreed with the EU and while the outcomes of this deal are/were still being analysed, the Money Advice Service confirmed IHT rules would not be affected by the fact that the UK has left the EU.
This would continue regardless of how the situation unfolded, as they explained: “Inheritance tax is charged on transfers of worldwide assets by people domiciled in the UK, and transfers of UK assets by people not domiciled in the UK.”
Where IHT is due, it must be paid by the end of the sixth month after the person’s death.
If the tax is not paid within this timeframe, HMRC will begin charging interest on the debt.
Usually, funds from the estate itself are used to pay IHT to HMRC.
This is usually managed by a person assigned to deal with the estate, known as an executor if there’s a Will in place.
The beneficiaries, the people who inherit the estate, do not normally pay tax on the assets they inherit.
Where estates are likely to incur IHT, the Money Advice Service notes it’s a “good idea” for an executor to pay some of the tax within the first six months of death, even where the valuing of the estate isn’t finished, as this can reduce the potential interest added down the line.
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