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bigduckontax, Accountant
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Should for purpose of reducing tax a property in uk be transferred

Customer Question

Should for purpose of reducing tax a property in uk be transferred prior to owners death to the resident in Germany who will inherit
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.


UK Inheritance Tax (IT) kicks in at GBP 325K and is at a flat rate of 40% on the surplus. Thus if the owner's estate, including the property which is the potential gift, will not exceed this amount upon demise there are no UK tax implications.


If the estate is going to exceed 325K then the gift will create a Potentially Exempt Transfer (PET) which runs off at a taper over 7 years. A PET is added back to the estate in the event of an early demise and is the first tranche to suffer IT. If the estate is inadequate to meet the IT then it cascades down to the beneficiary for immediate payment. The solution is to protect against the PET by means of a reducing term live insurance.


I do hope I have thrown some light on your question.