| There is no inheritance tax in Australia. However, UK | | | | or between couples in a civil partnership. |
| domiciled individuals are liable to UK inheritance tax at | | | | Taxable Estate |
| 40% on their worldwide assets. | | | | Your estate includes everything owned in your name |
| Domicile | | | | and your share of anything your own jointly. Also |
| To be deemed "non-resident" in the UK, you only have | | | | included are gifts from which you still derive some |
| to work abroad for a full tax year and spend no more | | | | benefit, such investments held in some trusts from |
| than an average of 90 days a year in Britain. | | | | which you receive an income. |
| But everyone acquires a "domicile of origin" at birth, | | | | Set against this total is everything that you owe, |
| which is normally the country in which they are born. It | | | | including any outstanding mortgages or loans, unpaid |
| is very much more difficult to change your domicile at | | | | bills, and funeral expenses. |
| a later date, even after you have lived abroad for | | | | Reducing IHT |
| many years. This is why most expats remain UK | | | | Any amount of money given away outright to an |
| domiciled, particularly those who retire overseas. | | | | individual is not counted for tax as long as the donor |
| If you want to be domiciled in Australia you must | | | | lives for a further seven years. These gifts are called |
| submit a DOM1 form to your local HMRC office and | | | | 'potentially exempt transfers' and are useful for tax |
| sever all ties with the UK. This involves closing all UK | | | | planning. |
| bank accounts, selling all assets in Britain and even | | | | Money put into a 'bare' trust is also a potentially |
| organising your funeral abroad. | | | | exempt transfer. A bare trust is a simple trust where |
| Even if you are granted a new domicile of choice in | | | | the beneficiary is entitled to the trust fund at age18. |
| Australia, it takes three years for the loss of UK | | | | They are often used to leave money to grandchildren |
| domicile to become effective for IHT purposes. | | | | for example, to stop them having access to it until they |
| IHT Threshold | | | | are older. The beneficiaries of a bare trust cannot be |
| You only begin paying IHT above a certain point. The | | | | changed. |
| threshold is £325,000 (£650,000 for | | | | Discretionary trusts are for more flexible than bare |
| couples) but in 2010-2011 it will go up to £350,000 | | | | trusts and are therefore more popular for inheritance |
| (£700,000 for couples). | | | | tax planning. Gifts to discretionary trusts are treated as |
| If the value of your estate, including your home and | | | | chargeable lifetime transfers. There is no tax to pay |
| certain gifts made in the previous seven years, | | | | on chargeable lifetime transfers up to the threshold but |
| exceeds this figure, your estate will be taxed on the | | | | amounts over are taxed at 20% immediately and a |
| excess at 40%. | | | | further 20% is payable if the donor dies within seven |
| There is no tax to pay on transfers between spouses | | | | years. |