British expatriates who presume that they are no longer liable to UK inheritance tax (IHT) because they are tax resident in Spain risk leaving their heirs an unexpected tax bill.

It is domicile, rather than residence, that determines your liability to UK IHT. The basic rule is that you are domiciled in the country where you have your permanent and indefinite home, often described as your ‘homeland’ or the place with which you have the strongest ties. You can live in Spain for many years and still be a UK domicile.

If you are UK domiciled at the date of death, IHT is charged on your worldwide assets at 40% above a threshold, currently £325,000 for individuals and £650,000 for spouses/civil partners. Transfers between UK domiciled spouses are exempt.

You also need to consider whether your assets will be subject to Spanish succession tax and how the two taxes interact.

IHT is often described as a ‘voluntary tax’ due to the number of ways it can be mitigated or avoided.

While it is difficult to change your domicile it is not impossible, but you need to take steps to achieve this. This is an area Blevins Franks specialises in.

Unless you are 100% sure that neither you nor your spouse will ever return to the UK, it is unlikely that you will change your UK domicile. In any case, if you move back to the UK you would become a UK domicile again. You should therefore consider other options to mitigate IHT.

At Blevins Franks our estate planning solutions are always personalised to your circumstances and objectives.

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.