EPPL’s 4th session of the Estate Planning & Wealth Succession Asia Forum Professional Mini-Series 2023 on 24 October explored crucial aspects of estate planning for UK properties. The panel included Colm Walpole, managing partner at Walpole and Partners, offering insights into UK property markets; Gladys Yow, founder of a UK-based accountancy firm, addressing tax issues for non-resident UK property investors; and Amy Tan, founder and managing director of Accede Group of Companies, who hosted the event.
Here are some of the key issues highlighted during the forum:
1. Shift in inheritance tax dynamics
Traditionally, investors sought refuge from UK inheritance tax by housing properties within non-UK companies which is why investors set up British Virgin Islands or Singapore companies. However, a significant change occurred in April 2019 when the transfer of shares became a deemed disposal, bringing it under the purview of inheritance tax. This change applies to both UK and non-UK residents.
2. Inheritance tax Lifetime allowance
Every individual, regardless of residency, is entitled to a Nil Rate Band, also known as lifetime allowance (for inheritance tax), presently (as of the session) at £325,000. Transfers between spouses upon demise are tax-free, allowing couples a combined tax-free allowance of £650,000. The unused allowance of the deceased spouse can be transferred. The “seven years prior to death” rule allows tax-free asset transfers if done within this time frame. Merely having a Will dated seven years before is insufficient – a physical transfer, often through a trust deed, is crucial for effective tax planning.
3. Joint ownership considerations
In joint ownership, if the joint owner is not a spouse, inheritance tax may apply. It is essential to recognise that the first death is not necessarily tax-free, emphasising the importance of having a Will for UK assets, including joint bank accounts.
4. Properties held as company assets
Shares in non- UK companies holding UK properties are now subject to inheritance tax, even if the company has diverse assets. properties in the UK may or may not incur inheritance tax based on the nature of its asset portfolio.
Case Studies - Practical applications
Gladys Yow illustrated these principles through case studies. In one scenario, a husband’s death left a property to the wife, resulting in no inheritance tax. The wife, inheriting her husband’s lifetime allowance, could pass on the property to their children tax-free when she eventually passed away. Another example highlighted the strategic estate planning of David Cameron’s parents, showcasing how assets could be distributed without incurring inheritance tax with proper foresight and planning (please see BBC Article on the assets of David Cameron’s father: https://www.bbc.com/news/uk-politics-36007718).
Gladys emphasised the importance of drafting Wills for UK assets, including joint bank accounts, and retaining mortgages on buy-to-let properties to counter inheritance tax. She reassured investors that with thoughtful planning, inheritance tax need not be feared.
Conclusion of the forum
In sum, the session provided valuable insights into the nuanced landscape of inheritance tax concerning UK properties. Investors were encouraged to stay informed, draft comprehensive wills, and consider various factors in their estate planning. Gladys Yow’s practical insights served as a roadmap for navigating the complexities of UK property wealth succession.
The session’s coverage extended beyond inheritance tax, including discussions on stamp duty, income tax, and capital gains tax. You can watch the full presentation here: https://bit.ly/epf23s4uktaxvideo. For more information, you can reach Gladys through https://gladysyow.com/.
Disclaimer: Note that the Mini-Series is structured for professional advisors’ educational needs and is not meant to provide legal or tax advice. Consumers are advised to seek independent professional advice. The views expressed by speakers are their own and do not represent the views and advice of EPPL and PreceptsGroup. Professional advisors seeking a foundation in Estate Planning can explore authorised learning providers listed on EPPL’s website: www.epplasia.com. For Singapore, inquiries can be directed to [email protected] for information on available grants.
This article was first published in our newsletter, The Custodian Issue 28. Click here to access our latest newsletter
