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Inheritance Tax and estate Planning

In the UK, IHT stands for "Inheritance Tax." It is a tax levied on the estate (property, money, and possessions) of a deceased person Domiciled for tax purposes in the UK when they pass away. The tax is also sometimes referred to as the "death tax."

When a person dies, their estate is assessed, and Inheritance Tax is applied if the value of the estate exceeds a certain threshold known as the "nil-rate band." Currently, the nil-rate band is £325,000. This means that any value above this threshold would be subject to taxation.


However, there are certain exemptions and reliefs available that can reduce the amount of Inheritance Tax payable. For example, gifts made to charities or gifts between spouses or civil partners are usually exempt from the tax. Additionally, there is a concept of "residence nil-rate band" introduced in April 2017, which can provide additional relief for individuals passing on their main residence (if UK resident) to direct descendants.


Inheritance Tax (IHT) in the UK is charged at a rate of 40% on the portion of an estate that exceeds the nil-rate band. The nil-rate band is the threshold below which no Inheritance Tax is due. At this time, the nil-rate band is £325,000 per individual.

To calculate the Inheritance Tax payable, you would need to follow these steps:

  1. Determine the value of the deceased person's estate.

  2. Subtract any debts, liabilities, and funeral expenses from the estate value.

  3. Subtract the nil-rate band from the remaining estate value to find the amount subject to Inheritance Tax.

  4. Apply the 40% tax rate to the taxable amount to calculate the Inheritance Tax payable.

Inheritance Tax and estate Planning

  • Your estate will be subject to IHT if, when you die, if it exceeds the individual nil-rate band which currently stands at £325,000.

    Calculating how much your family will have to pay is often, although not always, simple.

    Count up the value of all the assets, subtract the nil-rate band and the RNRB if applicable and what is left will be taxed at up to 40% - paid for by your estate.

    If your spouse dies before you without fully using their nil-rate band, the unused amount can be carried forward to use when you die.

    The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

  • With the family home often making up a large percentage of an estate, the government has introduced an additional nil-rate band on top of the £325,000, known as the ‘residence nil-rate band’ as mentioned above.

    The current residence nil-rate band is up to £175,000.

    This means that if you give away the home you lived in before you died to your children (including adopted, foster or stepchildren) or grandchildren, they won’t have to pay IHT on the first £500,000 (£325,000 nil rate band + £175,000 residence nil-rate band) of its value if they sold it.

    If you are a married couple or in a civil partnership then you can combine both your nil-rate bands, meaning that the first £1,000,000 of your assets, including your property are free from IHT.

    As with most things in life, it’s rarely as simple as the example we’ve given. There’s a lot of complicated rules and calculations to follow when you’re working out how much IHT your family will have to pay, but we’re here to help.

    The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

  • In the United Kingdom, there is a concept called "spouse exemption" or "spouse relief" when it comes to Inheritance Tax (IHT). This means that if one spouse or civil partner passes away and leaves their entire estate to the surviving spouse or civil partner, no IHT is typically payable on the estate, regardless of its value. This is due to the fact that transfers between spouses or civil partners are generally exempt from Inheritance Tax, regardless of the amount involved. The idea behind this exemption is to ensure that assets can be passed on to the surviving spouse or civil partner without being subject to a tax that might create financial difficulties during an already challenging time. 

  • Tax domicile, also known as tax residency, refers to the country or jurisdiction where an individual or entity is considered a resident for tax purposes. Being a tax resident in a particular country means that you are subject to that country's tax laws and may be required to report and pay taxes on your worldwide income and assets to that country's tax authorities.

    Tax domicile is typically determined by specific rules and criteria set by each country's tax laws. The rules can vary significantly between countries, but some common factors that can establish tax domicile include:

    1. Physical presence: The number of days you spend in a country during a tax year may be used to determine tax residency.

    2. Permanent residence: Owning a home or having a permanent place of abode in a country can establish tax residency.

    3. Economic ties: Significant economic interests, such as employment, business activities, or investments, in a country can contribute to tax residency.

    4. Family ties: Family connections, such as a spouse or dependent children residing in a country, can be a factor in determining tax domicile.

    5. Intentions: Your declared intentions and future plans regarding residence can also play a role in determining tax residency.


    Tax domicile is essential because it determines the tax obligations of an individual or entity and affects which country has the right to tax specific types of income and assets. It is crucial to understand the tax rules of each country in which you have significant connections to ensure compliance with tax regulations and avoid any potential double taxation issues.

    Additionally, tax domicile can have implications for estate planning and eligibility for certain tax benefits and deductions in a specific country.

  • You are UK-domiciled but tax resident in Qatar, the UK Inheritance Tax (IHT) rules will therefore apply to your estate. The UK has specific rules for determining the domicile status of an individual, and if you are considered UK-domiciled, you will be subject to UK Inheritance Tax on your worldwide assets, regardless of where you reside.


    As a UK-domiciled individual, your estate will be subject to IHT on your death, and the tax will be calculated based on the value of your worldwide assets at that time. This includes assets in Qatar and any other country.

    However, there is a Double Taxation Agreement (DTA) in place between the UK and many countries to prevent double taxation of estates in certain situations. The DTA determines which country has the primary right to tax specific types of assets and provides mechanisms for offsetting any taxes paid in one country against the tax liability in the other.

  • We would always recommend that you take a legal tax opinion from a suitable 3rd party at the time of establishing a QNUPS, we can also assist you with this process. Taking a tax opinion when planning a QNUPS (Qualifying Non-UK Pension Scheme) is important for several reasons:


    • Complexity of Tax Laws: Tax laws and regulations can be intricate and vary significantly between different jurisdictions. Establishing a QNUPS involves navigating the tax rules of both the home country and the jurisdiction where the QNUPS will be set up. A tax opinion from a qualified tax advisor can help clarify the tax implications, potential benefits, and compliance requirements involved.

    • Compliance and Reporting: Tax authorities expect individuals to comply with tax laws, and failure to do so can lead to penalties and legal issues. A tax opinion will help ensure that your QNUPS is structured in a manner that complies with all applicable tax regulations, both in your home country and the jurisdiction of the QNUPS.


    • Maximizing Tax Efficiency: Proper tax planning can help you optimize the tax benefits of a QNUPS. A tax advisor can guide you on how to contribute funds to the QNUPS in a tax-efficient manner, reduce tax liabilities, and take advantage of any available exemptions or reliefs.


    • Minimizing Double Taxation: Taxation of pension funds and distributions can vary widely between countries. A tax opinion can help you understand how your contributions and withdrawals from the QNUPS will be taxed in both your home country and the QNUPS jurisdiction, and whether there are any provisions to avoid or mitigate double taxation.


    • Changing Tax Laws: Tax laws are subject to change, and what might be a tax-efficient strategy today may not be so in the future. A tax opinion can take into account the current tax landscape and any potential changes that may impact your QNUPS planning.


    • Avoiding Tax Pitfalls: Without proper advice, you may inadvertently structure your QNUPS in a way that triggers unintended tax consequences. A tax opinion will help you avoid potential pitfalls and ensure that your QNUPS aligns with your overall financial and estate planning goals.


    1. Personalized Advice: Tax planning is not one-size-fits-all. A tax opinion provides personalized guidance tailored to your specific financial situation, objectives, and the countries involved.


    In summary, seeking a tax opinion from a qualified tax advisor with expertise in international tax planning and pensions can provide valuable insights, mitigate tax risks, and ensure that your QNUPS is set up in a way that aligns with your long-term financial goals while complying with all applicable tax laws. This would also demonstrate to any authorities that you have pursued an appropriate solution to your needs.

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