UK Inheritance Tax - 40% tax rate in the UK

In Singapore, the equivalent of inheritance tax (called Estate Duty) was abolished some years ago.  So, many Singaporean investors in overseas properties may not be immediately aware of inheritance tax implications when it comes to purchasing property overseas, e.g in the UK.

This is taken from the UK HMRC website:

"Inheritance Tax is usually paid on an estate when somebody dies. It's also sometimes payable on trusts or gifts made during someone's lifetime. Most estates don't have to pay Inheritance Tax because they're valued at less than the threshold (£325,000 in 2014 to 15). The tax is payable at 40% on the amount over this threshold or 36% if the estate qualifies for a reduced rate as a result of a charitable donation."

In our case, the value of the properties will almost surely exceed £325,000.  So, inheritance taxes will hit.

One common question asked is this.  Assuming your UK property has two names, you and your spouse. If you pass away, does inheritance apply?  Or will your surviving spouse be able to get the property free of tax?

The answer can be found on the HMRC website - http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

Spouse or civil partner exemption
Your estate usually doesn't owe Inheritance Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK - nor on gifts you make to them in your lifetime - even if the amount is over the threshold.

So, do you have a permanent home in the UK?  If not, inheritance tax will apply, once an overseas owner passes on.

Conclusion
With these inheritance tax considerations, it is clear to us that we would be looking to sell off our properties, or most of our properties, in the medium term.

E.g. start liquidating some of our UK properties as we near retirement age.

Happy Investing!