Everything you need to know about moving to NZ

New Zealand does not have a system of inheritance tax or death duties in place, but you are right to be concerned about your continued liability to UK Inheritance Tax when you move to New Zealand. Though not a pleasant subject in any respect (death and taxes…), we urge you to read on – it’s not as bad as you may think!

Your liability to UK inheritance tax (IHT) on your worldwide assets centres around a concept called domicile. There are different types of domicile (domicile of origin, domicile of dependency, domicile of choice, and deemed domicile). The one that applies for UK inheritance tax in this case is deemed domicile.

To be deemed domicile in the UK (and therefore liable to inheritance tax on your worldwide assets) you need to have been:

• domiciled in the United Kingdom within the three years immediately preceding the relevant time, or
• resident in the United Kingdom in not less than seventeen of the twenty years of assessment ending with the year of assessment in which the relevant time falls.

Basically, this means that once you have been living outside the UK for three years, or more specifically three tax years, you will not be liable to UK inheritance tax on your assets held outside the UK.

So how about any assets you have retained in the UK?

Assets you hold in the UK will generally still be subject to UK inheritance tax.

If you are leaving assets in the UK in the long term worth in excess of the current nil rate band for IHT, it may be worth investigating ways of reducing your liability. These include setting up a New Zealand trust and settling your UK assets into it.

If you are contemplating this, please note that it can be worth setting up your New Zealand trust before you are committed to moving to New Zealand – which may sound strange, but there are issues of New Zealand tax domicile involved.

On tax and trust matters we work closely with Martin Riley of Sterling Tax Services and Jonathan Cron of New Zealand Trustee Services, and we suggest that you contact them if you have further questions. For more information on domicile and your liability to inheritance tax, have a look at this page on foreign aspects of IHT on the HMRC website.