Australian residents with UK assets including UK pension schemes should obtain UK IHT planning advice now to ensure that they protect their wealth from UK IHT in the event of their passing away. Significant UK IHT changes were announced on 30 October 2024, of which some of these changes have now become law in the UK.
This represents a massive opportunity for British expats living in Australia to reduce or eliminate their potential UK IHT liability on death.
Also, owners of UK businesses should undertake UK IHT planning urgently.
Broadly these changes were:
- Cessation of the assessment of IHT on the basis of domicile status and commencement of the assessment of IHT based on the new long-term residence rules. These changes took effect from 6 April 2025.
- Associated removal of the IHT benefits of non-UK trusts. These changes took effect from 30 October 2024 and 6 April 2025, respectively.
- Restriction of Agricultural Property Relief to £1m relief at 100% and 50% thereafter. This change is anticipated from 6 April 2026.
- Restriction of Business Property Relief to £1m relief at 100% and 50% thereafter. This change is anticipated from 6 April 2026.
- Removal of IHT exemption for funds held in pension funds which is expected to occur from 6 April 2027.
Note that the last three items above are anticipated changes, but this have not been legislated at the time of writing. Nevertheless, it is essential to obtain UK IHT advice if you have UK assets of GBP£325,000 or more.
Below are a few scenarios where it is important to obtain tax advice urgently:
- Persons who left the UK to relocate to Australia 10 or more years ago, but still have UK assets over £325,000. These persons may be able to claim that they are not long-term residents of the UK and therefore are only liable to UK IHT on their UK situated assets. However, great care must be taken to consider the Australian and UK capital gains tax and where relevant income tax implications of moving the assets from the UK.
- Persons with Australian tax resident trusts where one or more beneficiaries live in the UK or there is an intent for one or more beneficiaries to relocate to the UK.
- Persons holding Agricultural Property in the UK worth more than £1m.
- Persons holding interests in UK businesses worth more than £1m, whether this be shares in UK unlisted trading companies; Limited Liability Partnerships, partnerships and sole trader businesses. Many businesses will have expanded their operations to the UK without undertaking UK IHT planning, as it was expected that UK IHT relief in the form of 100% business property relief.
- Persons living in Australia with UK pension funds, who are 55 years of age or older.
At Nexia we would be happy to assist you with UK IHT planning and restructuring your assets in a way that is more tax efficient. Please contact your Nexia advisor for advice.
