A series of articles highlighting key areas that affect taxpayers and practitioners involved with inheritance tax and estates and identifying opportunities to mitigate inheritance tax.
 
Transfer to Spouse
 
The general rule is that transfers between spouses whether on death or during lifetime are normally exempt from inheritance tax.
 
However, where the gift is made by a UK domiciled person to a non UK domiciled person, the spousal exemption is currently limited to £55,000.
 
The Draft Finance Bill 2013 includes legislation that will increase the exempt amount to the amount of the nil rate band at the date of the transfer.
 
Thus increasing the amount that may be transferred free of inheritance tax to a non UK domiciled spouse from £380,000 (£325,000 + £55,000) to £650,000 (£325,000 + £325,000).
 
Furthermore, the non UK domiciled spouse will be able to elect to be treated as though they are UK domiciled for inheritance tax purposes. However, such an election will bring the entirety of the spouse’s estate into the UK inheritance tax net, therefore advice should be taken before an election is made.
 
These changes are expected to come into effect from 6 April 2013, although the precise wording of the legislation may change before the provisions are enacted into law.

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