IHT – unmarried and childless? Discriminatory IHT .. needs reform !

silvercar

Choice or not the rules are there because they make sense that inheriting from outside of your parental line is a bonus over and above what you could inherit from your parental line.

If you want to avoid this, start giving away money when you are young.

At the end of the day you won’t be around to see the benefit your money has given.

poseidon1

silvercar said:

Choice or not the rules are there because they make sense that inheriting from outside of your parental line is a bonus over and above what you could inherit from your parental line.

If you want to avoid this, start giving away money when you are young.

At the end of the day you won’t be around to see the benefit your money has given.

A rather silly observation.

This country, has tax legislation which is deliberately discriminatory on grounds of public policy.

A prime example is the IHT exemption for gifts between spouses. Between 1982 all the way to 2013 it has been successive government policy to restrict this blanket exemption only to spouses who are both British born.

However where the surviving spouse is non UK domiciled ( ie not British at birth and has not acquired a British domicile of choice), until 2013 the deceased UK spouse could only pass £55,000 to the non British  survivor IHT free. Anything above that which exceeded the deceased's nil rate band was liable to capital transfer tax and latterly Inheritance tax.

Following criticism of this practice by the EEC, in 2013, the £56,000 limit was increased to £325,000  in addition to the usual £325,00 nrb, however lifetime gifts from British spouse to non British can erode the new limit. There is no potentially exempt transfers in this scenario - see explanatory article below -

https://www.ashtonslegal.co.uk/insights/news-for-individuals/international-love-mixed-domicile-spouses-and-inheritance-tax/

The fact that 99% of the UK population are entirely oblivious of these complex discriminatory measures does not make them less so. Evidently in this regard  being a non British born spouse is not a protected characteristic entitling one to the same fiscal treatment ( for IHT purposes) as a British born equivalent.

Attempts by posters to defend the UK's discriminatory fiscal laws in relation to inheritance taxes, is based on lack of knowledge of  the extreme complexity of the regime depending on the nature of relationships . I suspect that many foreign born spouses living in the UK would be unpleasantly surprised to learn that until relatively recently they were treated only marginally better than single unmarrieds.

https://www.farrer.co.uk/globalassets/news-articles/downloads/inheritance-tax-election-for-non-uk-domiciled-spouses.pdf#:~:text=As a general rule, transfers between spouses,the UK assets of a non-UK domiciliary.

DRS1

Interesting but let's not forget that the non domiciled spouse had plenty of tax breaks under UK law not just IHT (only on UK situs assets I think) but also income tax and CGT (remittance basis).

poseidon1

DRS1 said:

Interesting but let's not forget that the non domiciled spouse had plenty of tax breaks under UK law not just IHT (only on UK situs assets I think) but also income tax and CGT (remittance basis).

I think the biggest tax break for most spouses  in this scenario will be the IHT free gift exemption on death, especially where the primary asset is the matrimonial home. 

A non dom spouse with no overseas assets  or income of  note is hardly going to appreciate the non dom remittance basis of tax  or  excluded property relief they previously 'enjoyed' prior to the 2025 residence and domicile tax changes. 

 There are large number of mixed domicile uk marriages where the parties are in no way in the super wealthy league, so  IHT free gifting is the only exemption they would feel is important to them, but wholly unaware it does not necessarily apply.