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bigduckontax, Accountant
Category: Tax
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I'm a non-dom and planning to buy a property in UK

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I'm a non-dom and planning to buy a property in UK (GBP505K), I don't need a mortgage but wonder what kind of personal loan arrangement I should set up in order to reduce the future IHT of my kid.
Assistant: Thank you. Can you provide any more details to help us find you the right Expert?
Customer: My plan is to have the money borrowed from my spouse, who is also a non-dom, pay her the interest offshore in order to lower down the net asset value of the property.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Frankly, I do not think you need to worry. From 2017 trough to 2020, for a residence left to children, the IHT level rises progressively from 325K to 1 million. You could cover this risk with a short term life insurance. Please come back to me if I have not managed to solve your conundrum.

I do hope that my reply has been of assistance.

Customer: replied 1 year ago.
Do you mean the following?
In the 2015 Summer Budget, the chancellor, George Osborne announced a new transferable main residence allowance, which will gradually increase from £100,000 per person in April 2017 to £175,000 per person by 2020/21. This is in addition to the main nil-rate band. It will effectively raise the IHT-free allowance to £500,000 per person. Where married couples jointly own a family home and want to leave this to their children, the total IHT exemption will be £1m................However, the intended purchaser of the property will be one person (my spouse) and based on her will, the property will be passed to our child. would that affect the tax position?

Not quite, here is the BBC press release on the matter:

'From April 2017 parents will each be offered a further £175,000 "family home allowance" to enable them to pass property on to children tax-free after their death.

This will be added to the existing £325,000 inheritance tax threshold, bringing the total transferable tax-free allowance from both parents in a married couple or civil partnership to £1m.'

If this property in in your wife's name only then there will be a tiny amount of IHT to pay (on 5K, 2K). If you put it in Joint names then you will achieve the 1 million exemption. As a non dom you are only subject to UK IHT on your UK assets.

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Customer: replied 1 year ago.
Thanks, ***** *****

Thank you for your support.

You could, of course, protect the small amount of IHT involved with a single owner with an insurance policy.