Question
We live in the UK and have no children. We have made wills in the UK and in Dublin leaving everything to the surviving partner. We pay tax in Ireland and in the UK on the rental income from two houses we own in Dublin.
Will we have to pay inheritance tax on the property in Dublin as the houses are in my husbands sole name would I have to pay tax on the proceeds of them if he died?Answer
Under both UK and Irish inheritance tax rules a husband and wife can pass assets (including property) between each other on death free of inheritance tax. So if your husband dies before you and leaves the houses to you in his will then there should be no tax to pay.
However, this doesn’t necessarily mean there won’t be inheritance tax to pay in future. If your husband outlives you, or passes the property to you on his death and you own them on your death, then the resulting estate might exceed the tax-free threshold.
This will depend on the value of the properties along with your other assets and possessions as well as whether you fall under UK or Irish inheritance tax rules. The latter will depend on where you’re deemed to be ‘domicile’.
You can only have one domicile and it’s usually the country where you have your permanent home. You normally inherit your father’s domicile from birth but can change it from age 16 if you settle in another country and can demonstrate you intend to live there permanently.
Under UK inheritance tax law you can also be ‘deemed’ domicile in UK when you transfer assets if you were resident in the UK for 17 of the last 20 income tax years. And if you leave the UK permanently you’ll still effectively be deemed domicile for three years afterwards.
Assuming that both you and your husband are UK domiciled and resident then the properties will fall under the UK inheritance system (it will apply to your worldwide property). Both you and your husband have an inheritance tax allowance of £325,000 before tax of 40% is charged. If your husband passes everything to you on his death his unused allowance can be passed to you, giving you an effective allowance of £650,000 on your death (obviously the allowance could change in future).
If your husband passes the property to someone other than you (e.g. children) when he dies and it’s within his £325,000 allowance then no inheritance tax will be payable. Or if he gifts them to someone else and lives for at least seven years afterwards, they’ll fall outside of his estate so won’t be subject to inheritance tax.
If your husband is domiciled in Ireland but resident in the UK then both Irish and UK inheritance tax could apply on his death. There is however an agreement between both countries to avoid paying tax twice. In this instance he’d be liable to Irish inheritance tax on his worldwide property and subject to UK inheritance tax on any UK property, although any UK tax paid should be credited against any Irish liability on the UK property.
Hope this makes sense – international inheritance tax is not the simplest of subjects...
We live in the UK and have no children. We have made wills in the UK and in Dublin leaving everything to the surviving partner. We pay tax in Ireland and in the UK on the rental income from two houses we own in Dublin.
Will we have to pay inheritance tax on the property in Dublin as the houses are in my husbands sole name would I have to pay tax on the proceeds of them if he died?Answer
Under both UK and Irish inheritance tax rules a husband and wife can pass assets (including property) between each other on death free of inheritance tax. So if your husband dies before you and leaves the houses to you in his will then there should be no tax to pay.
However, this doesn’t necessarily mean there won’t be inheritance tax to pay in future. If your husband outlives you, or passes the property to you on his death and you own them on your death, then the resulting estate might exceed the tax-free threshold.
This will depend on the value of the properties along with your other assets and possessions as well as whether you fall under UK or Irish inheritance tax rules. The latter will depend on where you’re deemed to be ‘domicile’.
You can only have one domicile and it’s usually the country where you have your permanent home. You normally inherit your father’s domicile from birth but can change it from age 16 if you settle in another country and can demonstrate you intend to live there permanently.
Under UK inheritance tax law you can also be ‘deemed’ domicile in UK when you transfer assets if you were resident in the UK for 17 of the last 20 income tax years. And if you leave the UK permanently you’ll still effectively be deemed domicile for three years afterwards.
Assuming that both you and your husband are UK domiciled and resident then the properties will fall under the UK inheritance system (it will apply to your worldwide property). Both you and your husband have an inheritance tax allowance of £325,000 before tax of 40% is charged. If your husband passes everything to you on his death his unused allowance can be passed to you, giving you an effective allowance of £650,000 on your death (obviously the allowance could change in future).
If your husband passes the property to someone other than you (e.g. children) when he dies and it’s within his £325,000 allowance then no inheritance tax will be payable. Or if he gifts them to someone else and lives for at least seven years afterwards, they’ll fall outside of his estate so won’t be subject to inheritance tax.
If your husband is domiciled in Ireland but resident in the UK then both Irish and UK inheritance tax could apply on his death. There is however an agreement between both countries to avoid paying tax twice. In this instance he’d be liable to Irish inheritance tax on his worldwide property and subject to UK inheritance tax on any UK property, although any UK tax paid should be credited against any Irish liability on the UK property.
Hope this makes sense – international inheritance tax is not the simplest of subjects...
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