Today I learnt, if you retire abroad you're still on the hook for UK inheritance tax for ten years

[Another2Cats]

I'm not too sure if I've just had my head under a rock all this time and this is common knowledge but I was really suprised to find this out.

For context, relatives of mine who are retired have a holiday home in Portugal and they have now decided to sell up in the UK and move to Portugal permanently.

Apparently, in last year's budget the rules were changed so that if you die within ten years of leaving the UK then you still have to pay UK inheritance tax (IHT) on your entire worldwide estate (not just any assets left in the UK).

So, if you've lived your entire life in the UK and then decide at the age of 75 to sell up and move abroad then, if you die before the age of 85, your entire estate is still subject to UK IHT.

Just another thing to have to consider if you're thinking about retiring abroad.

People have to pay their taxes. Who knew?

Before that it was just five years and a few years ago it was just three years.

It's quite a big jump to go from five to ten years.

Personally I would find it very irritating if people could dodge their liability to inheritance tax by skipping off abroad!

Excellent. It used to be impossible almost to change domicile, sounds as if that can be done more easily.

It is good to have clarity, but I'm not sure how the UK Government is planning to trace people and assets that have left the country. Like you say, it is not always common knowledge so who will notify the UK authorities.

Surely this is the opposite? You can’t change domicile for longer now, right?

I didn’t no but I’m not surprised, seems totally reasonable.

There is a strong chance of next government being a combination of Reform and Tory and they are very likely to abolish IHT all together. So just try no to die in the next 5 years or so

Don't they also come back for medical care?

Regardless, they've had the benefit of it and everything else taxpayer funded all their lives.

I can't see anything unreasonable there.

It’s no longer a domicile test, which has some subjective aspects. It’s a residence test, which has objective statutory rules.

How would it be enforced if all their assets were now overseas?

Very few people pay IHT … less than 4% of the population.

If you fall into that 4% then you’ve generally inherited a lot of money, will be in a very fortunate position financially and a bit of tax won’t hurt you!

They'd have to inform DWP if they were receiving state pension, otherwise they'd not know.

The “only 4%” claim gets thrown around a lot, but it overlooks who’s actually in that 4%. These days, it’s regular families hit hard by soaring home prices, not people sitting on huge piles of cash. Many heirs aren’t genuinely wealthy — they’re just dealing with estates rich in assets but short on liquidity. Being labeled “fortunate” doesn’t make it fair to tax the same money two or three times. Overtaxation is still overtaxation. I’m strongly against IHT and believe it should be scrapped. Money and assets have already been taxed multiple times over someone’s life, and calling it “fair” doesn’t make double or triple taxation any less wrong. People work hard, pay income tax, NI, VAT, council tax, stamp duty, and more — then, when they pass away, the state takes another cut of what’s already been taxed. It’s basically state-sanctioned theft. It hits asset-rich but cash-poor families the hardest, while the truly wealthy often find ways to avoid it. Any party promising to abolish IHT would win votes, and it’s not just the wealthy who’d support it — plenty of middle-class people would too.

"Very few people pay IHT … less than 4% of the population."

In 2022/23 it was 4.6%. This figure is predicted to double to around 9.5% by 2030.

You also need to look at different examples of the type of people who are caught by this.

For example. You are divorced and have no children. In that situation, your estate will pay IHT on any amount above £325k. If you have children and leave your home to them then IHT is payable on anything above £500k.

Twelve months ago the median price of a house in England was £300k - going from £527k in London down to £170k in the North East (Source: Local Government Association, LG Inform).

Married people have double the allowance, but if you are divorced or living together and unmarried then the lower figures apply.

I think that IHT should be scrapped, but that all assets of the dead ought to be deemed as disposed of, before they are inherited and subject to CGT.

An inheritance is a transfer of wealth and at the moment, if a parent gave a house to a child there would be CGT to be paid. A house going to a spouse would not. It would just mean the gift was at death - much as we view an inheritance.

the CGT would be calculated since purchase, so would capture house inflation - one of the biggest drivers of today’s wealth. It would stop all the shenanigans around the rich being able to gift assets, as long as they live more than 7 years … something the more moderately wealthy can’t afford to do.

i think there should be tax to pay for services, but find IHT clunky and open to abuse by the very wealthy. I would also ban the use of offshore trusts to hold property, or ignored for tax purposes. If someone treats a house as their possession, they should generate tax as if they own it normally.

there should be tax and everyone should pay it.

Yes I saw this and it’s one reason why we accelerated our retirement and left last year. It wasn’t well advertised, and sprung very quickly. The objective was to slow the exodus of people from the UK by adding a tail where they can still grab your assets.

´Leaving the UK as a long-term resident
You can still keep long-term UK residence for up to 10 tax years after you leave the UK.

This is shorter if you have not lived in the UK for all the previous 20 years.
For example, if you previously lived in the UK for:

• 10 to 13 years, you’ll stop being a long-term UK resident 3 years after you leave
• 14 years, you stop being a long-term UK resident 4 years after you leave
• 15 years, you stop being a long-term UK resident 5 years after you leave

If you return to the UK after 10 consecutive years of non-residence, the 10 out of 20 years residence test is reset. Only the year you return and future years of residence count towards your UK residence. ´

https://www.gov.uk/guidance/inheritance-tax-if-youre-a-long-term-uk-resident

You don’t understand. IHT has always applied to nonresidents with UK assets. This is a new tax grab whereby IHT has been expanded to include all worldwide assets of nonresidents if they so happen to have lived in the UK as a long term resident in recent years.

Don’t forget that they’ve now made inherited pensions subject to IHT. Even a modest survivor benefit of £10k/yr would boost the estate value by £100k plus

Well, it has been suggested that instead of IHT we could have Capital Gains Tax on death instead...............

The wealthiest 4% of families are not “just regular families”. You know how percentages work. That’s a tiny elite of wealth.

Most countries have some form of inheritance tax, but I wonder how this would work in countries where there is a dual taxation treaty. Say you live and work in a country like France- would you pay inheritance tax on your French property in France and the UK? There is a dual tax treaty, so normal income is only taxed once.

Sounds like another brilliant Labour tax idea -so instead of chasing rich people and causing them to move abroad with their wealth they are now encouraging them to move e abroad even sooner to avoid this tax- soooo clever🙄

The double taxation treaties are still applicable. There is a new one in (or coming in) place for Portugal. It is always best to seek specialist advice though.

As a dual national, with assets in both countries, it can be complicated, but is easily dealt with once you've taken advice.

Double Taxation agreements are a bit complex. However, the bottom line is that if you are liable pay IHT in both countries on worldwide assets, e.g. in the UK based on the recent law (death within ten years of moving) and in the other country based on residency or domicile, then when all the credits are worked out you will end up paying the equivalent of whichever the higher tax bill is in either country. You don't pay double.

So the best plan is to find a country that has a similar charge to the UK and that's basically what you'll pay. Once.

Not quite as simple when filling out the forms, but that's the basic rule.