UK Inheritance Tax & Estate Planning

Estate planning remains essential for UK expats living abroad. Many believe that moving to Portugal will exempt them from UK Inheritance tax (IHT), as Inheritance tax in Portugal was abolished in 2004. However, one must be aware that IHT applies to your worldwide assets including physical property owned or shares of a property in an offshore company, not just to your assets in the UK.

As the Inheritance tax rate for all assets over the nil-rate band is 40%, it is possible to build up a large bill quickly. In addition, inheritance tax becomes payable relatively soon, as it is due six months after the end of the month of death.

Portuguese laws can also present further problems as the Portuguese adopt "Law of Succession" under Civil Law. "Law of Succession" will distribute your estate assets based upon "forced heir-ship". Where someone other than direct next of kin inherits, the estate will be subject to a Stamp Duty tax of 10%.

With advice and careful planning, these complexities can be offset, and liabilities mitigated.