Marry For Love Or Taxes?

A recent article in the business pages of this esteemed organ commented that globe-trotting professionals would benefit if they married somebody who is not UK domiciled. This was because HMRC, in a rare act of generosity, is set to increase the inheritance tax (IHT) exemption on gifts to non-domiciled spouses from £55,000 to £325,000.

I suppose this is almost fair comment but only if you think by further enriching a spouse by dying is actually beneficial to you. I might argue that staying alive is rather more beneficial and certainly rather more appealing.

Most of us don't like to contemplate our own death. It is almost certainly true that we are all going to die - although some research suggests that within a relatively short number of years, life expectancy will be increasing at a rate faster than life itself. Many agree that within around 20 years average life expectancy will be increasing aby more than 1 year per year so in theory we will all live forever. I am not sure what state we will be in and how much we will be able to enjoy the additional years but it is an interesting thought. If you believe that then perhaps you have no need to write a will or consider your IHT position - as long as you are sure you will survive to reach this immortal era. I suppose that even then you are not necessarily going to be the one of the lucky ones who have avoided getting hit by a bus or dying prematurely from some other unfortunately accident. So perhaps it is best to get your affairs in order and try and maximize the amount of your hard earned wealth that you leave to your loved ones and minimize the amount which will be taken by the tax man.

UK IHT is charged on the value of a UK domiciled person's worldwide estate at 40%. There is an exemption from tax on the first £325,000. Most UK expatriates, even those who have lived outside the UK for many years, will remain UK domiciled. Domicile is not a statutorily defined concept. You are born with a domicile and can only have one domicile. Domicile is adhesive. It is difficult for anybody with a UK domicile to lose it. The test of domicile is purely one of intent. If a UK person settles in a new country and intends to stay in that country indefinitely he will have legally acquired a new domicile of choice in his new adopted country. The generally perceived wisdom is that in order to acquire a new domicile it is necessary to give up all connection with the UK e.g. sell your UK property, stop voting in...