Moving to Italy is an exciting time, which means that you’ll be forgiven for not immediately thinking about what will happen to your property and assets if you were to pass away.

 

Although it’s a delicate subject, it is important that you get clued up on how succession laws and inheritance tax work in Italy, so that the interests of your loved ones are protected.

If you are considered ‘domiciled’ overseas, UK inheritance tax will only be charged on your UK assets.

As this can be a confusing area, and it’s important that you get it right, we always recommend consulting an independent lawyer and a financial advisor. They can help to ensure your interests are protected and that you are aware of all potential liabilities.

UK Inheritance Tax – a question of domicile

The amount of UK Inheritance Tax that needs to be paid will depend upon where the deceased was considered ‘domiciled’. For the purposes of inheritance tax, ‘domiciled’ is not the same as ‘nationality’ or ‘residence’, it is instead the country you call home on a permanent basis.

So, for example, if you leave the UK to live in Italy, but plan to return to the UK at some stage, the UK will be where you are considered ‘domiciled’.

If you are living abroad, but are considered ‘domiciled’ in the UK, UK inheritance tax will be charged on your worldwide assets.

If you are living overseas permanently, under current UK inheritance tax rules, the taxman will still consider you ‘domiciled’ in the UK for the three years immediately preceding the transfer of inheritance funds.

If you are considered ‘domiciled’ overseas, UK inheritance tax will only be charged on your UK assets.

If you are living abroad, but are considered ‘domiciled’ in the UK, UK inheritance tax will be charged on your worldwide assets.

Italy - Before Purchase - inheritance

Make the most of your assets with careful currency planning.

 

Inheritance Tax thresholds

Currently, Inheritance Tax is charged at 40 percent on any amount that you leave over £325,000 if you are single/divorced, or £650,000 if you are married, widowed, or in a civil partnership. This threshold is frozen until 2019.

Transfers between spouses

If both spouses are considered ‘domiciled’ in the UK, transfers between them are exempt from Inheritance Tax. If one of the spouses, or civil partners, is not ‘domiciled’ in the UK, there is a limit imposed of £55,000 on the amount that can be transferred free of Inheritance Tax.

It’s important to make sure you draw up an Italian will, to clearly outline what should be done with your estate upon the event of your death.

Making sure your assets go to the right people

No doubt you’ll want the peace of mind of knowing that when you pass away, your assets are transferred to those you care about the most. This is why it’s important to make sure you draw up an Italian will, to clearly outline what should be done with your estate upon the event of your death. We recommend that you can draw up a will with your independent solicitor, as soon as you arrive in Italy. Click here to be put in touch.

Maximise the value of your estate through currency planning

In the majority of inheritance cases, there will be a sum of Inheritance Tax to pay. It’s unavoidable. One thing you can do to maximise the value of the estate that has been left to you, is to use a currency exchange specialist to make the payments. They can secure you the best exchange rate, and help you to avoid transfer and banking fees. A currency exchange specialist, like our trusted partners, Smart Currency Exchange, can also help you to lock in an exchange rate that you’re happy to trade at using a Forward Contract, which allows you to a lock in an exchange rate for up to a year. This is particularly useful if you have large inheritance sums to transfer between countries, or if you plan on setting up ongoing regular payments. To learn more about how Smart Currency Exchange can help you save money on your inheritance, get in touch today.

Italy Property Guides can also put your in touch with our trusted, qualified, independent lawyer who can help talk you through all the inheritance issues you might encounter in Italy. Get in touch with them today.

Download your free copy of the Italy Property Guide for more information on buying in Italy today.

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