IHT When Partner Not Domiciled in the UK

An inheritance tax (IHT) liability might arise from a transfer of assets between spouses or civil partners if the assets pass to a spouse / civil partner who is not domiciled in the UK for IHT purposes.

There is one major restriction on the IHT spouse / civil partner exemption. The exemption is limited to £325,000 if assets pass to a spouse or civil partner who is not domiciled in the UK for IHT purposes.

The best way to deal with this situation is generally to make outright lifetime transfers to the non-UK-domiciled partner, which will rank as potentially exempt transfers and insure the potential IHT liability for the seven-year period. Failing that, life assurance to cover the potential liability on transfers at death is a simple and flexible approach.