Cyprus Inheritance Tax
The amount of Inheritance tax you will be required to pay will depend on a number of factors and your personal circumstances.
The general rule is: If you are domiciled in the UK at the time of your death, then your worldwide estate – not just the assets in the UK – will be liable to UK inheritance tax (IHT).
The Inheritance Tax Threshold
The inheritance tax threshold is set in the UK at 40 per cent, however, everyone is entitled to a tax free amount – also known as the “nil rate band” – which is currently £325,000 – or up to £650,000 for married couples and registered civil partners if the “transferrable nil rate band” applies.
This means that the combined value of your worldwide estate* is calculated – and only the amount that is over the tax free amount will be taxed at 40 per cent. The tax is paid from the assets in the estate before they are distributed to the beneficiaries.
*Your “worldwide estate” includes the value of your assets in England, Cyprus and any assets that you may have in any other country. It may also include any gifts that you have made in the last 7 years.
If only Cypriot laws of inheritance apply… there will be no inheritance tax to pay as Cyprus inheritance tax was abolished in 2001.
New Inheritance Tax Allowance in the UK
Since 6 April 2017 – the start of the 2017/18 tax year – you are now entitled to an additional £100,000 tax-free ‘family home allowance’, which can be used against the value of your property if you leave it to your children or grandchildren.
You won’t qualify for the increased nil-rate IHT band if you’ve assigned your sibling or any other relation to
inherit your family home, as the rules only apply to your direct descendants.
The additional £100,000 allowance will increase annually to £125,000 in the 2018/19 tax year and to £150,000 in 2019/20, before reaching £175,000 in 2020/21.
Where you are domiciled is important
The particular country where you are domiciled can be both critical and complex.
If you are not domiciled in the UK… UK inheritance tax will only apply to your assets that are located in the UK .
There may be some exemptions or reliefs available according to:
- Amount of inheritance tax payable
- Who your beneficiaries are
- Nature of your assets.
Succession tax planning is extremely important if you want to ensure your beneficiaries will keep as much of their inheritance as possible. Professional advice and careful planning can often make a significant difference to the amount of tax payable. You should always ensure that you seek experienced specialist advice who can advise according to your individual circumstances.
What Michael Legal Firm can do for you
- Discuss inheritance tax planning with you as part of the preparation of your Will.
- Advise you on your current Inheritance Tax liability.
- Suggest ways that you can reduce or avoid your Inheritance tax liability and explain the possible benefits and disadvantages of each method.
- Advise on trusts in the Will for spouses, minor children, persons under a disability and tax efficient trusts.