Sweeping changes to UK property inheritance tax regulations

27 March 2017

As from 7 April 2017, wide-ranging changes to the UK’s Inheritance Tax (IHT) regime is likely to affect thousands of property investors.

Although the exact terms of the new law are yet to be announced, the proposed changes mean investors in UK residential property will be liable for IHT, whether or not the property is held in a company or partnership, registered in the UK or overseas.

The domicile status of the owner will no longer be relevant. So property owned by a ‘non-dom’ who lives outside the UK will still be liable for IHT.

A further proposed change is that loans taken out related to the property will also be liable to IHT, although it is not yet clear how the property-related proportion of a loan will be treated, in terms of IHT.

The main impact on overseas property investors with residential assets in the UK is likely to be:

  • There will no longer be a tax advantage in holding property in a corporate structure
  • It may be helpful for investors to consult with their advisors ahead of the April 2017 deadline, to see whether they can take action to improve their tax position
  • Understanding the full consequences of the change in IHT legislation is important for investors when making decisions on their current and future investment portfolios

Michael El-Kassir, General Manager International at GRE Assets, commented: “We can be sure that changes to UK IHT regulations are coming into force in April, although the exact terms are not yet clear. Our tax advisors are in consultation with the UK government and will contact investors in the coming weeks to explain fully.”