Living in a sunshine paradise, thousands of miles from the wet and windy UK sounds like a sensible choice.

For considerable numbers of expats and foreign nationals, being away from the unpredictable British climate could certainly be judged as a relief in itself. But there have been other benefits associated with being non-doms; one of which has been the opportunity to own UK property without being subject to UK tax. Until very recently, that is.

Now, the tax climate has shifted and the outlook for those very same expats and overseas investors isn’t necessarily as sunny as it once was.

As a result of amendments in the UK Finance Bill (April 2017), for foreign nationals who own property in the UK, the rule is that when they die they will pay UK inheritance tax (IHT) – despite not being UK tax payers and even if they are paying their taxes in another country. The HMRC claws spread far and wide!

The Bill brings all UK residential property in to the IHT net – regardless of its ownership structure and – wait for it – the residency or domicile status of the ultimate owner.

This is of special significance to all non-UK domiciled individuals and non-UK resident trustees who directly or indirectly own residential property – regardless of whether it is a single buy-to-let investment, a portfolio of houses, or a central London pied-a-terre used on rare visits to the City.

The legislation also applies to those who have lent money or provided security for a loan to acquire, maintain or repair a UK residence.

Any offshore ownership structures previously set up to safeguard the value of UK residential property from IHT will now be subject to this tax for the first time. IHT charges will potentially arise on the death of and following certain gifts made by non-doms, as well as during the life of certain trusts which they may have established to hold the property.

Let’s say you own a property, or number of residential properties in and around London worth £3 million. Under the new rules, even after personal allowances are taken in to consideration, the IHT liability would still be around £1 million. Whilst this may seem harsh – it’s an issue that can’t be ignored.


The Solution

Nevertheless, there are ways to mitigate against any IHT hit. And that’s where Sterling is already providing assistance.

One solution is to take out a life assurance policy for what the IHT liability is likely to be and to wrap the policy in a simple Trust.

With the Trust in place, once the assurance pays out, the money from the estate can be sent to the beneficiaries without going through probate. This will reduce any undue pressure on loved ones, who might otherwise be faced with an unexpected and onerous IHT bill.  We can arrange everything for you.

If you are a UK expat or foreign national with concerns about how IHT will affect any UK residential property you own, at Sterling Trust we are ideally placed to discuss the best available options appertaining to your specific situation. In the first instance contact Andy Cowin on 01624 611146 or email

© 2024 Sterling is a Registered Business Name of Sterling Holdings Limited. Sterling Trust Limited is registered in the Isle of Man Number 72969C and is licensed by the Isle of Man Financial Services Authority.


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