Following the Brexit vote, it is confirmed that the UK will leave the European Union at 11pm UK time on Friday 29 March 2019. As such, for those EU nationals who wish to acquire a second citizenship in the UK, a narrow window is still opened for you to do so until Brexit takes full effect.
During now to until 29 March 2019, European citizens can easily acquire residency in the UK provided that they are able to, amongst other things, provide evidence of sufficient recurring income and health insurance. The ease of access to the UK is likely to change after Brexit.
With regard to non-EU nationals, the UK has adopted immigration schemes which aim to attract investors, entrepreneurs and talented individuals to the UK. High net-worth individuals may apply for the Tier 1 Investor Visa. The investor category allows wealthy individuals who make a substantial financial investment to obtain residency in the UK. To qualify, the applicant must invest a minimum of £ 2 million in the UK. The attractions of the scheme lie in the short processing time and the certainty of a positive outcome when the criteria are met. The downside, however, is that the UK expects the investor and his/her family to physically take up residency in the UK and not to spend more than 180 days outside of the country in order to qualify for permanent residency after five years of stay. When the investment amounts are increased, it is possible to qualify for permanent residency after two (£ 10 mio) or three years (£ 5 mio).
The UK residents are in principle subject to progressive rates up to 45% on their worldwide income, with reduced rates for dividends and capital gains up to respectively 38.1% and 20%. However, in practice many high net-worth individuals are not subject to these general rates due to the distinction between "residence" and "domicile".
Under the UK law, it is possible to be considered as a non-domiciled resident (also referred to as a “non-dom”). From an income tax perspective, a non-dom is taxed only on his/her UK source income and remitted foreign source (for example, foreign income paid to a UK bank account). Similar rules apply to inheritance tax, effectively only levying inheritance tax on the UK-based estate.
Nevertheless, it is important to note that the non-dom regime is limited in time. After a 15-year stay (in any 20-year period), a resident is considered to be domiciled in the UK and therefore, is subject to the UK taxation on his/her global income and estate.
In an international context, the British court applies the inheritance law of the country where the deceased had its domicile. To be considered as a "UK domiciled" for the purpose of the UK law, the deceased should have resided in the UK for a significant period of time with the intention to permanently reside in the country. This also presumes that any ties with other countries have been abolished over time.
The British inheritance law gives complete freedom to the testator with regard to the division of the estate as the law does not have forced heirship rules.
The worldwide estate of a UK domiciled natural person or a deemed domiciled person (when being resident in the UK for 17 years out of the 20 years preceding the passing) will be subject to the UK inheritance tax. Nonetheless, if one was qualified as a UK non-dom, only UK situs goods will be subject to inheritance taxation in the UK.
The British inheritance tax applies a tax exemption of £ 325,000 (renewable every seven years). Any amount in excess of the exemption will be taxed at a rate of 40%. In the event that both spouses are considered UK domiciled, they can transfer their estate to each other free of tax.
When UK goods are donated, they will be included as part of the inheritance and hence, taxed accordingly if the donation precedes the passing by less than seven years.