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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am a non UK national who is also non resident in UK. I have

Resolved Question:

I am a non UK national who is also non resident in UK. I have an apartment in London for the last five years which I have used as my principal residence whenever I or my family members want to use the same. The property is jointly in the name of me and my wife. The property has never been rented out. The property is currently worth GBP,650,000.
The questions are as follows:
1. What happens if one of us pass away? Can the partner who is alive can sell the property? Will he or she will have to pay any inheritance tax?
2. What if both pass away? Can our children legally claim the property? Will they have to pay inheritance tax. One of my children is resident in UK.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you confirm that your wife is also non-UK domiciled please.
Customer: replied 2 years ago.

yes, she is also non-uk domiciled.

Expert:  TonyTax replied 2 years ago.
anks.

Leave this with me while I draft my answer
Expert:  TonyTax replied 2 years ago.

Hi again.

Take a look at the notes here. Inheritance Tax in the UK is mainly based on domicile, not residence as UK CGT is. Only the UK based assets of a non-UK domiciled individual are liable to UK IHT. That excludes UK bank accounts denominated in non-UK currency.

1 If you pass away, your share of the value of your UK property would normally be included in your UK estate for IHT purposes. However, the first £325,000 of that will be taxed at 0%, hence the name its given, the nil-rate band. Any balance will be taxed at 40%. Any part of your UK estate which you leave to your wife or her to you will be exempt from IHT due to the intra-spouse transfer rules if the receiving spouse has their permanent home in the UK. If you or your wife don't have your permanent home in the UK, then the estate of the spouse to die first will have to use the £325,000 nil-rate band.

If you or your wife leave all your UK estate to one another, then there will be no UK IHT liability if the surviving spouse has their permanent home in the UK. In that case, the unused nil-rate band of the spouse who passes away first can be transferred to the estate of the surviving spouse. Take a look here and here for more information on IHT..

2 You can leave the property to your children. If you and your wife passed away at the same time, you would each have a £325,000 nil-rate IHT band which at its current value would cover the UK property. If the house was worth £1,000,000 for example and you both passed away at the same time, £350,000 would be liable to UK IHT at 40% and if there was not sufficient cash or other liquid assets, either in the UK or outside the UK, your estate may have to sell the UK property to pay the IHT.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

If am confused. I am not resident nor uk domiciled. So what does this simply mean in terms of the question I asked?

Thank you

Expert:  TonyTax replied 2 years ago.
1 If you leave your UK house to your wife, that is fine but your UK estate may have to pay Inheritance Tax if its value when you die is in excess of £325,000 and your wife does not have her permanent home in the UK. In that case, the excess over £325,000 of your UK esate will be taxed at 40%.

If you leave your share of the UK home to your wife and the UK is her permanent home at that time, then there will be no IHT to pay on your share of the property.

Any Inheritance Tax liability has to be cleared before the estate beneficaries can take possession of any cash or assets.

2 Your children can inherit the UK property but only after any IHT liabilities, if there are any, have been paid by the estates of you and your wife. Whether there will be any will be dependent on the value of your UK assets at the time you each pass away and how much of those estates is covered by the nil-rate IHT band.

The links I gave you are quite clear and worth reading.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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