Britons leaving the UK to live a new life in the latest property hotspots could face huge financial disadvantage in the years to come if they don’t plan according to the inheritance tax laws of their new home, warns wealth manager and IHT planning specialist the WAY Group.
As well as disillusioned workers relocating abroad for a more relaxed and prosperous way of life, the number of pensioners making plans to retire overseas continues to rise.
Of an estimated total UK population of 12.2m pensioners in 2010, 9.8% are predicted to leave the country to spend their retirement abroad. And by 2050, this figure is expected to reach three million.*
“Whatever your age and wherever you’re going, it’s vitally important that the issue of inheritance tax planning is addressed before you leave the country,” says WAY Group’s Paul Wilcox.
“Every country has its own rules affecting IHT and the result of an altered domicile status without a tax mitigation strategy could be financially disastrous.
“We are now seeing countries like Turkey attracting more Brits as permanent residents – but this is a territory with incredibly complex, family orientated IHT planning laws, and retirees could seriously lose out if they do not take expert advice,” he adds.
The two-pronged appeal of low cost air travel and new players in the affordable overseas property market has opened up the choice of destinations for emigrating Britons way beyond steady favourites Spain and France.
With its high standard of living and positive attitude to attracting foreign investment, Dubai is the latest country to become a retirement hotspot for UK citizens. Morocco is another newcomer to the most popular destinations for the exodus of over 60s from the UK, thanks to its constant climate, proximity to Britain and new budget airline routes.
And Turkey’s booming property market has also seen a huge surge in popularity with UK buyers wanting to pass on sizable sums in equity to the beneficiaries of their wills. It’s also likely that in the future some of the Britons who have bought in countries such as Bulgaria, Croatia and Cape Verde will move to their holiday home properties permanently.
“Spain and France remain top choice for a retirement destination but IHT rules in these countries are well known to be punitive for expat Britons,” says Wilcox.
“If a couple retire to Spain to live in a jointly-owned property there will almost certainly be a very costly ISD charge (Spain’s version of IHT) upon the survivor when the first dies.
“Cyprus, on the other hand, with its historical links to Britain and benign tax regime, has no inheritance tax whatsoever which creates a very different scenario, although the country’s succession laws that restrict the disposal of assets after death can still lead to financial disadvantage.”
Rules can be complex and personal circumstances are viewed differently depending on the laws of the country, for instance whether you are married or not. Regardless of where you are going, it’s vital that all your assets are taken care of with an appropriate IHT mitigation plan.
The WAY Group offers an extensive range of IHT mitigations solutions designed to meet most scenarios, from HNW individuals to those on more modest retirement incomes. These are constantly reviewed to keep one step ahead of any changes to taxation laws that might adversely affect UK taxpayers, wherever they reside.
“It’s vital to be aware that wherever you go and whatever tax regime you may be affected by in your new country of residence, you may still incur IHT within the UK as well, possibly on the same assets,” Wilcox adds.
“And whilst there are double taxation treaties between the UK and many preferred destinations for those emigrating, they often exclude concessions on IHT.
“Although the UK authorities may allow ‘unilateral relief’ against any IHT paid elsewhere you may be hit with the double whammy of having to pay tax twice because of your domicile status.
“For anyone planning to emigrate, the message is money, tickets, passport – IHT mitigation plan.”
Incorporated in 1996, The WAY Group is a privately owned financial services group.
The founders of the company include ex-independent financial advisers who specialised in offering portfolio management services to private and corporate investors.
They have combined their experience and skills with a number of ex-institutional fund managers to design, construct, oversee and market, suitable portfolio solutions to the IFA marketplace. The ethos and approach to product design continues to reflect an appreciation of the requirements of IFAs and their clients.
For further information about The WAY Group products and services please call 01202 890895, or visit www.WAYinvestments.co.uk
* HM Revenue & Customs (HMRC) June 2008
Filed under: Financial, Overseas Property | Tagged: iht, inheritance tax | 1 Comment »