It is that time of the year again, when we see everyone around us with a golden tan and we have just arrived back to the miserable England weather from a fantastic holiday abroad. It is usually around this time of the year when the English think about owning a holiday home abroad and make their dream a reality.
However, so the dream doesn't turn into a nightmare, follow these top tips to make sure that buying a holiday home is plain sailing before you follow your dream. Unfortunately, we have seen far too many households disrupted when clients have chosen to ignore professional advice.
1. Make sure you have a Will in England dealing with your English assets
A Will ensures that your affairs are in order in England and if the worst should happen to you, your loved ones will be looked after.
2. Take advice about your inheritance tax position in England
You should take advice about your inheritance tax position in England and how this interacts with your assets worldwide. For example, someone who is domiciled in England (i.e. born and live in England) he/she is subject to pay inheritance tax on his/her worldwide assets. Each individual in entitled to a Nil Rate Band of £325,000. Anything above this is taxed at 40%! (subject to a few exemptions and reliefs).
3. Take advice about your domicile status
If you are not domiciled in England, you could still be "deemed" to be domiciled here for tax purpose. If this is the case, the inheritance tax rules are different. Individuals domiciled in India, Pakistan, France and Italy can take advantage of a favourable tax treaty and avoid paying additional inheritance tax.
4. Take advice about a Will in the country where you are thinking about purchasing your home
An English Will is not necessarily recognised abroad, so it is imperative that your assets abroad are dealt with under a Will. You should see a local solicitor specialising in this area of law, in the locality that you are thinking of buying your house.
5. Take specialist advice from the country where you are thinking about purchasing your holiday home
You should ensure that you speak to a specialist about your tax affairs. You could be subject to income tax, inheritance tax and capital gains tax abroad and it is important that you familiarise yourself with this before you purchase your property.
The way that you purchase your property could have a huge impact on how you are taxed in the future, so it is important to obtain the correct advice before you sign on the dotted line!
6. Ensure that both countries advisors communicate with each other and your English Will does not revoke your foreign Will and vice versa.
In England it is common to have an opening clause in the Will "revoking all previous Wills", and this could be the case abroad also. If you have two Wills, i.e. one in England and one abroad, it is important that this clause is altered; otherwise you could be left without a valid Will.
Contact Oratto on 0845 3883765 to speak with an adviser or use our contact form to arrange a call-back.