Are you a Brit considering retirement abroad? Or are you already retired here in Spain? A recent budget change might make that decision even sweeter. Starting in April, Brits living overseas for over 10 years will no longer face inheritance tax (IHT) on foreign assets.
This move replaces the old "domicile" system with a residency-based rule, bringing significant benefits for long-term expats in popular retirement hotspots like Spain, particularly Andalucia.
What Does This Mean for You?
Inheritance tax carpentry set at $40%$, applies to global wealth if you're considered domiciled in the UK. Under the new system, however, foreign assets will be exempt for those who meet the residency criteria. Tax experts describe this as a game-changer for expats who previously struggled to shake off their UK domicile status. "It was tough to lose your UK domicile status," says a spokesman for the UK law firm Clifford Chance LLP; "This shift is fantastic news for long-term expats."
For those considering Spain, check out our guide "Property Buying Process in Spain".
A Push to Retire Abroad
The changes are expected to encourage more people to consider overseas retirement and this could provide the nudge many needed. For some, the choice between staying in England or relocating to sunny Spain now comes with the added incentive of escaping hefty inheritance tax penalties.
This might influence decisions for retirees choosing between England and warmer destinations with better tax benefits.
Who Benefits?
The rule changes don't just help retirees. Wealthy entrepreneurs and expats like Richard Branson or fund manager Terry Smith, based outside the UK since 2017, are among those set to benefit.
Experts warn, however, that many expats may remain unaware of how the new rules could impact them. "Some might not even realise that they are unexpected beneficiaries of the new regulations".
More Certainty, Less Hassle
The old domicile rules were complex and often unclear. Many expats found it difficult to confirm their status, leaving executors dealing with disputes after their death.
The new residency-based approach simplifies things significantly. Brits living abroad for over a decade gain certainty and clarity, avoiding disputes with HMRC over their tax obligations.
What About Returning Expats?
The changes offer opportunities for those considering a move back to the UK too. Brits returning after 10+ years abroad will enjoy full relief on UK taxes for foreign income and capital gains during their first four years of residence.
Is This Your Chance?
Whether you're a retiree dreaming of Spain or a seasoned expat already living here, these changes could significantly alter your tax planning. With the potential to save your heirs thousands, it's worth exploring how this new rule might apply to your circumstances.
Considering retiring abroad? This could be your golden opportunity ...
Please ensure that you get proper tax planning advice from a qualified professional, MartínezEchevarría, legal partner firm of Monarch Estates can offer a prompt evaluation for you ...
For more information do not hesitate to contact us:
www.monarchestates.es