UK Tax Planning 2018

Revenue UKApril 2018 will mark the end of another tax year. With a promise of no further tax changes to be announced at the slimmed down UK Spring Statement on 13 March, we can plan with some certainty.

Here are a summary of key considerations and actions pre 6 April. Contact us to discuss the opportunities available for you, your family and your business.


Lifetime allowance for pension contributions

  • The Lifetime Allowance (LTA) reduced from £1.25m to £1m in April 2016.
  • You can opt for Fixed Protection 2016 in order to preserve the £1.25m allowance.
  • The LTA will be indexed-linked in line with the Consumer Price Index from 6 April 2018.

IHT planning

  • If you die before age 75 you can pass your pension fund to anyone you choose, including non-dependents, free of tax.
  • For people who die over the age of 75 benefits can be passed on to anyone but will be subject to tax at the beneficiary’s marginal rate of tax.

Inheritance Tax

  • Make sure that you have a will and review it periodically to ensure that it still leaves your estate to those you intend, and that it remains tax efficient.
  • The IHT annual exemption of £3,000, in aggregate on gifts to individuals, is £6,000 for 2017/18 where you did not use this exemption in 2016/17 and can reduce your estate.
  • Separately, gifts of up to £250 to any individual during 2017/18 are also exempt.
  • Increased relief for gifts is available if made in consideration of marriage/civil partnership.
  • Other gifts to individuals made during your lifetime which are potentially exempt transfers (PETs) will be disregarded when calculating any IHT due on your death once you have survived seven years from the making of the gift.
  • Gifts into trust can be considered up to your (unused) nil rate band of £325,000 without creating an IHT charge at lifetime rates, there have been published draft measures which prevent multiple use of the nil rate band.
  • The existing nil-rate band of £325,000 will remain fixed until 2020/21.
  • An additional nil-rate band will apply where a residence is passed on to descendants on death. This was introduced in April 2017 at £100,000 and wil rise to £175,000 by 2020/21.
  • Any unused nil-rate band can be transferred to a surviving spouse for use on their death.
  • The new nil-rate band only applies to properties used by the deceased as their own residence, so buy-to-let properties will not be covered.
  • The additional band will be tapered away for estates worth more than £2m.
  • Measures will be introduced to allow those who down size or sell their homes before death to benefit from the increased inheritance tax bands.
  • Regular gifts out of income which do not impinge on that needed to support your usual standard of living can be IHT exempt, even if made within seven years before death, and should be carefully recorded.
  • If you have been resident for 15 out of the last 20 tax years you will be ‘deemed domiciled’ for inheritance tax (IHT) purposes and therefore subject to IHT on your worldwide assets.

Non-domiciled taxpayers and remittance basis

  • From April 2017, non-domiciled taxpayers who have been UK residents for more than 15 of the last 20 tax years are deemed UK domiciled for all tax purposes.
  • Anyone treated as deemed domiciled will not be able to access the remittance basis charge and will be taxable on worldwide income and gains. Worldwide assets will be subject to inheritance tax.
  • It will now take five years to lose your deemed domicile for inheritance tax purposes when you leave the UK rather than three years.
  • The remittance basis charges of £30,000 and £60,000 for those resident for seven out of nine years and 12 out of 14 years respectively remain unchanged.
  • Taxpayers with a UK domicile of origin who move aboard and take up an overseas domicile will be taxed as UK domiciled if they return and become UK resident again.


Non-domiciled taxpayers and inheritance tax on UK residential property

  • From April 2017, all UK residential property held directly or indirectly (i.e. through a company, trust or partnership) by a foreign domiciled taxpayer is subject to IHT.
  • There is no exemption for let or occupied properties, nor is there any de minimis limit.
  • IHT will be due when a specifically defined chargeable event occurs, including the death of the individual shareholder or the tenth anniversary of the trust.
  • The definition of ‘excluded property’ will be amended so that it no longer includes shares in companies which derive their value from UK residential property.
  • The definition of ‘excluded property’ will be amended so that it no longer includes shares in companies which derive their value from UK residential property.
  • Only the value of the UK residential property will be chargeable to inheritance tax if the company has diverse assets.

Non-domiciled individuals should consider the following planning opportunities

Check when you are likely to become deemed domiciled to ensure that you make the most of any planning opportunities before becoming deemed domiciled. For individuals who became deemed domiciled on 6 April 2017 (and no later) the proportion of any gain that accrued prior to 6 April 2017 will not be taxable. That proportion of gain could be brought to the UK with no further tax charge if it has remained “clean”.


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