FIG, IHT and gifts.

I'm looking at the new FIG regime and have a question to ask the hive.

It looks like I won't become a long term resident for UK tax until I've been resident for 10 years. Will gifts I make to UK residents from US assets (eg a ROTH account) before I become a long term UK resident fall outside the scope of IHT?

I don’t know but I am interested in seeing any responses

According to this website any gifts are excluded from IHT if the person making the gift is not UK resident
https://www.saffery.com/insights/articles/inheritance-tax-reforms-for-uk-non-doms/

Where an individual makes a lifetime gift to another individual, they should only be within the scope of IHT if they die within seven years of the gift. From 6 April 2025, where an individual is not a long-term resident at the date of a non-UK gift, the gift remains outside the scope of IHT, even if they die within seven years at a time when they are a long-term resident. Similarly, gifts made by long-term residents are within the scope of IHT, even if they cease to meet the criteria by the date of their death.

The following article also seems to confirm that non-UK assets remain outside the scope of IHT in these FIG conditions

https://www.taxadvisermagazine.com/article/scope-inheritance-tax-new-residence-based-system

From 6 April 2025, the concept of domicile as a connecting factor for inheritance tax purposes will be replaced with the concept of a long-term resident.

UK assets will always remain within the scope of inheritance tax, as under the current rules. The test of whether non-UK assets are within the scope of inheritance tax will be whether an individual qualifies as a ‘long-term resident’. An individual will be treated as a long-term resident once they have been resident in the UK for ten out of the 20 years prior to the taxyear in which a chargeable event (such as death) arises.

I don’t know but I am interested in seeing any responses

According to this website any gifts are excluded from IHT if the person making the gift is not UK resident
https://www.saffery.com/insights/articles/inheritance-tax-reforms-for-uk-non-doms/

The following article also seems to confirm that non-UK assets remain outside the scope of IHT in these FIG conditions

https://www.taxadvisermagazine.com/article/scope-inheritance-tax-new-residence-based-system

Yes that's the sort of web content I'm looking at too. I've been giving to my UK family for a while now, but it was based on me being in the US. If I can come to the UK and still have 10 years to reduce my estate without UK IHT becoming a factor it will be another useful financial tool.

Yes that's the sort of web content I'm looking at too. I've been giving to my UK family for a while now, but it was based on me being in the US. If I can come to the UK and still have 10 years to reduce my estate without UK IHT becoming a factor it will be another useful financial tool.

I think you will be good to go with gifting and not needing to consider IHT while you are non-resident under FIG.

The budget in November may change things, plenty of speculation that she is going to make major changes to IHT, but since FIG is very new I can't see those rules changing and I would expect IHT to continue to not allow apply on non-UK assets for non-residents.

I think you will be good to go with gifting and not needing to consider IHT while you are non-resident under FIG.

The budget in November may change things, plenty of speculation that she is going to make major changes to IHT, but since FIG is very new I can't see those rules changing and I would expect IHT to continue to not allow apply on non-UK assets for non-residents.

Yes, lots of things seem very uncertain right now. I'm giving to several family members up to the $19k IRS reporting threshold right now and I'm moving  $100k from my TIRA into a ROTH each year to stay inside the 24% tax bracket. But I think those amounts are going to increase dictated by FIG 4 year foreign income rules and the 10 year IHT gifting exemption. I feel a call to Tower Tax coming on next year depending on election results. Do Tower, Guya, BritishAmericanTax offer advice on tax strategies or do they just complete and file your taxes?

Wait, what? What is FIG (I know, sorry, this is probably a dumb question), secondly, this convo seems super pertinent to me/us as a) my US citizen husband is about to bail out a US citizen relative who has fallen on hard times and b) I, a dual citizen, am about to fund a house deposit for a UK friend.  We have been uk resident since 2016, so < 10 years.  Does this mean neither gift will be subject to inheritance tax if we’re hit by a bus?
Also, whereas I was going to bring money from my US bank account, to my UK bank account to give my friend pounds, should i now be planning a direct xfer to her so as to insure it’s ’US Assets’?

Wait, what? What is FIG (I know, sorry, this is probably a dumb question), secondly, this convo seems super pertinent to me/us as a) my US citizen husband is about to bail out a US citizen relative who has fallen on hard times and b) I, a dual citizen, am about to fund a house deposit for a UK friend.  We have been uk resident since 2016, so < 10 years.  Does this mean neither gift will be subject to inheritance tax if we’re hit by a bus?
Also, whereas I was going to bring money from my US bank account, to my UK bank account to give my friend pounds, should i now be planning a direct xfer to her so as to insure it’s ’US Assets’?

Foreign Income and Gains replaces the old non-dom rules. I'm looking at them as I might be returning to the UK soon. The old non-dom rules were, if anything, a little more generous. Read this and see how it applies to you and maybe get some advice if you are uncertain. In general I think it's safer wrt UK IHT if you make gifts from US assets. Also whatever your status there's the 7 year taper on IHT for lifetime gifts.

https://www.saffery.com/insights/articles/inheritance-tax-reforms-for-uk-non-doms/

Yes, lots of things seem very uncertain right now. I'm giving to several family members up to the $19k IRS reporting threshold right now and I'm moving  $100k from my TIRA into a ROTH each year to stay inside the 24% tax bracket. But I think those amounts are going to increase dictated by FIG 4 year foreign income rules and the 10 year IHT gifting exemption. I feel a call to Tower Tax coming on next year depending on election results. Do Tower, Guya, BritishAmericanTax offer advice on tax strategies or do they just complete and file your taxes?

I don’t know if any of the tax companies you listed offer tax strategies, I’ve really only used them to complete my taxes.

I don’t know if any of the tax companies you listed offer tax strategies, I’ve really only used them to complete my taxes.

OK I'll ask them when I actually decide to move. Just going over the new FIG regulations, IHT and ROTH conversion issues are not trivial and I would want any US/UK tax professional I employ to ensure that I'm doing sensible things. That might be an added cost and might run into regulatory issues so I can see why open loop tax completion might be the default service.

@nun - You have got to be somewhat of a rareity if you're considering returning to the UK  - the UK press is full of articles on a daily basis about UK citizens seeking to emigrate because of the current governments' tax policies and what seems like their relentless attacks on those of us who are retired.

The changes that took place last year mean that for long term UK tax residents choosing to emigrate, escaping the IHT net takes 10 years.

The freezing of personal allowances also creates a fiscal drag that is almost certainly going to be extended with the November budget. There is also talk of a 2%  increase in basic rate of income tax that will be offset by a corresponding reduction in National Insurance but will have the effect of capturing more tax from those who are retired.

Making pensions pots subject to IHT (April 2027) has been the final straw for many.

The effect of fiscal drag means that drawdown income (post the 25% tax free lump sum) can quite easily go into the 40% income tax bracket  (not difficult to get there if you have a UK state pension and a US SS retirement pension and a small amount of either taxable interest or a private pension) - after which there's a need to spend it quickly (ie. before death!) otherwise this subsequent post tax income forms part of your estate and can get taxed again through IHT at up to another 40% and if the deceased is over age 75, then beneficiaries can also be taxed at their own marginal tax rate . The amount of cumulative tax payable can be eye watering - although in fairness, the finer details of the 2027 change have not yet been agreed and published.

Net effect is that many feel their pensions are trapped and inaccessible unless you're prepared to pay 40% income tax on much of the drawdown (increasing every year) - hence why many see their only other option is to emigrate to countries with a more friendly tax regime.

Apologies if I went off topic a bit - still fuming over the UK government pursuit of those of us who were fiscally responsible in planning their retirement! 

If Nun's plan works out his only/main retirement pot will be in a Roth IRA on which he has only ever paid US taxes. Roth withdrawals are tax free in both the US and UK. In the 10 years after retiring and before the latest HMRC rules my wife and I converted our entire IRAs and 401ks to Roths at low US tax rates and have since been moving lots of money from them to the UK tax free. Last year my wife moved her entire Roth to the UK tax free in order to buy 2 houses which she now lets out.

I transfer a bunch of money from my Roth each year tax free even though I am in the 40% bracket these days due to pensions including SS.

@nun - You have got to be somewhat of a rareity if you're considering returning to the UK  - the UK press is full of articles on a daily basis about UK citizens seeking to emigrate because of the current governments' tax policies and what seems like their relentless attacks on those of us who are retired.

The changes that took place last year mean that for long term UK tax residents choosing to emigrate, escaping the IHT net takes 10 years.

The freezing of personal allowances also creates a fiscal drag that is almost certainly going to be extended with the November budget. There is also talk of a 2%  increase in basic rate of income tax that will be offset by a corresponding reduction in National Insurance but will have the effect of capturing more tax from those who are retired.

Making pensions pots subject to IHT (April 2027) has been the final straw for many.

The effect of fiscal drag means that drawdown income (post the 25% tax free lump sum) can quite easily go into the 40% income tax bracket  (not difficult to get there if you have a UK state pension and a US SS retirement pension and a small amount of either taxable interest or a private pension) - after which there's a need to spend it quickly (ie. before death!) otherwise this subsequent post tax income forms part of your estate and can get taxed again through IHT at up to another 40% and if the deceased is over age 75, then beneficiaries can also be taxed at their own marginal tax rate . The amount of cumulative tax payable can be eye watering - although in fairness, the finer details of the 2027 change have not yet been agreed and published.

Net effect is that many feel their pensions are trapped and inaccessible unless you're prepared to pay 40% income tax on much of the drawdown (increasing every year) - hence why many see their only other option is to emigrate to countries with a more friendly tax regime.

Apologies if I went off topic a bit - still fuming over the UK government pursuit of those of us who were fiscally responsible in planning their retirement! 

I increasingly avoid the worst excesses of the papers, but my reasons for returning to the UK are not financial...I just hope it doesn't become a case of jumping from the "frying pan into the fire". I also try to be phlegmatic when it comes to money as there are far more important things to worry about, but I will take sensible steps to organize my finances efficiently in any move from the US to the UK. As durhamlad points out that involves moving TIRA balances to ROTHs without paying UK taxes using my time in the US and the 4 years of relief from UK tax on foreign income under FIG and also the 10 years I would have to make gifts from foreign assets without any UK IHT impacts. In this way the majority of my estate will avoid UK IHT and income it generates will be tax free in the US and UK. I will have to pay tax on SP, SS, my DB pension and interest and dividends and I'll be lucky enough to be in the 40% tax bracket.