IHT - non UK residents with UK assets

A couple has approached me regarding IHT.

Their circumstances are as follows:

He is UK born and now lives in Australia. He has a UK passport and an Australian passport

She is Australian born and has an Australian passport.

They have a property (joint tenancy) in the UK and a UK bank account.

They have a Will in Australia for non-UK assets.

He has two adult daughters live in UK who are UK domicile. They want the property to go to the daughters on second death. The property is worth £1.3M

Their questions are:

• does he qualify for NRB and RNRB in the UK?

• does she qualify for NRB and RNRB in the UK?

• if he dies first, will she be able claim spousal exemption?

• if she dies first, will he be able claim spousal exemption?

• on second death, can the executors claim un-used NRB and RNRB of the first spouse.

• can they each claim annual exemption of £3,000.

• any other relevant points?

If H has retained his domicile within the UK, as his wife is non-UK-domiciled s.18(2) IHTA 1984 will apply to the effect that spousal exemption for UK IHT is limited to a lifetime allowance equivalent to the nil rate band (rather than the unlimited exemption where both spouses are domiciled within the UK, or both arte non-UK domiciled).

In reply to the specific questions:



Only to the extent permitted by s.18(2) IHTA 1984 (see above)


I believe so

CGT will also be an issue on the second death

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

The key issue is the domicile status of H. What was his domicile of origin and on what grounds (if any) could he claim non-UK domicile status (presumably an Aussie (or technically a State therein) domicile of choice?

A multiplicity of factors would be examined by HMRC if Aussie domicile of choice claimed. Although by no means a deal breaker, possessing a UK Passport, UK bank account, UK property and family in UK certainly doesn’t help any such argument.

Malcolm Finney

Paul and Malcolm,
Thank you for your replies which have been really useful.