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HMRC change of stance on UK non-dom inheritance tax

Non-domiciled UK residents are at risk of an unexpected tax on their estate upon death, due to a change in thinking at HMRC over inheritance tax.

Someone with non-domiciled status (‘non-dom’) is a person living in the United Kingdom yet registered as a foreign national, who doesn't pay income tax or capital gains tax on earnings abroad.

Until now, non-doms have been able to take out UK whole of life insurance policies and arrange for the plan to be held ‘under seal’ – outside the UK. Provided they were not living in the UK at the time of their death, the policyholder could save up to 40 per cent on IHT on the value of the policy.

But HMRC have turned their attention to such policies, and they may no longer be exempt from inheritance tax in their current form.

Any non-dom UK resident who has moved a life insurance policy overseas will now need to seek advice in order to protect themselves and their estates from inheritance tax.

Non-domiciled status is an attractive option for anyone who wishes to take advantage of the special arrangement in the UK, which will allow a foreign national to be resident in the UK and pay no tax on overseas earnings. There are potential savings of thousands of pounds, and here at St Matthew our experts will advise on whether you are eligible for non-dom status, and the resulting advantages.  

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