Personal Finance | 13 February 2025
Case study: Helping a ‘non-domiciled’ couple with inheritance tax planning
Last year’s UK Autumn Budget included a number of important changes for our international clients who live in the UK. Here’s an example of how we could support them.
This case study is based on the various ways we support our clients to demonstrate how we help them. We have changed names and details to protect client confidentiality.
The situation
Maria, 39, and her partner Pedro, 43, are Spanish citizens who have lived in the UK for three years. They are settled here with stable jobs and two small children at school.
They have a large UK mortgage of £1.6 million and several rental properties in Ibiza, which generate around £170,000 a year for them.
The couple wanted to better understand new tax rules for those with non-domicile status (or ‘non-doms’) following the government’s Autumn Budget last year.
They also wanted to plan their finances appropriately to ensure they were meeting those rules while making the most of their wealth for their family’s future.
The issue
As announced in the government’s Budget, from April 2025 the term ‘domicile’ will be removed from the tax system. A new tax regime will be introduced for those who come to live in the UK.
The changes mean Maria and Pedro now need to pay UK inheritance tax on their non-UK assets once they’ve lived in the UK for ten years, rather than 15 years as was the case previously.
They also now need to pay UK income tax and capital gains tax on their worldwide income and gains after they have lived in the UK for four tax years, something they didn’t have to do previously.
This will affect their finances given their overseas properties, so they were particularly keen to take appropriate tax planning steps.
Our solution
When it came to inheritance tax planning, getting a suitable level of life insurance in place was one of the most important measures for Maria and Pedro. Doing so has the potential to off-set their inheritance tax costs when they pass away.
Our specialists worked with them so they could consider their options and get their preferred level of cover. This means that now, as long as they keep paying their premiums, their children should get a lump sum when they die – money that’s paid into a tax-efficient trust.
We also helped the couple ensure they were making the most of the tax allowances available to them through their ISAs and pensions. This meant the money they were saving for their future could still grow as tax efficiently as possible in this country.
We do not provide tax advice at Coutts, but we worked with the couple’s tax advisers to ensure that the structures they used were appropriate from a tax perspective, and the way the accounts were reported made completing their tax returns relatively straightforward.
We also advised them to ensure they had up-to-date wills in both the UK and Spain, and other tax-efficient trusts which would help them pass on their wealth in a cost-effective way that met their wishes.
Eligibility criteria apply for our services. Fees and charges may apply.
The value of investments can fall as well as rise, and you may not get back the full amount you invest.
Tax reliefs referred to are those applied under current UK legislation, which may change. The availability and value of any tax relief will depend on your individual circumstances.
This case study should not be taken as advice.
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