By Peter Brooke
This article is published on: 8th April 2025
Quite understandably my inbox has been full of messages from concerned clients and musings from commentators and investment managers about how to respond to the current market reaction to President Trump’s raft of tariffs.
The uncertainty around how these tariffs will play out has led to large falls in stock markets, especially the US.
As discussed in my last newsletter Lets Talk About Risk, volatility is an important and unavoidable part of investing and will be negated by time in the market and can provide great opportunities. The key is to ‘stay the course’ and try and ‘see through the noise’.
However, I did want to get something out to you with some current thoughts about what is happening, what might happen in the near future and why ‘staying the course’ is the best option.
When markets turn volatile, perspective is everything.
The past week feels pretty tumultuous but, of course, we’ve been here before.
The table below shows the maximum intra-year drawdowns (DD) and end-of-year total returns (TR) for the S&P 500 from 1950 to 2025.
It reveals that after severe drawdowns, the market has often recovered the full decline and finished the year strongly positive.
Years to Note:
On each occasion, the best course of action would have been to avoid the noise and stay invested.
I hope that the above shows that though periods of volatility will always happen and always be temporary it is best to stay the course and try and avoid the noise;
I do appreciate that it is difficult with today’s ‘news’ channels adding to the feeling of panic on an hourly basis so I have shared below some links from firms much closer to the markets to share more detail about what is happening and what investors should consider in these temporarily volatile times.
Traversing Trump tariffs by Daniel Casali, Chief Investment Strategist at Evelyn Partners
Trump’s tariffs: how should investors respond? From Rathbones Investment Management
I would like, once again, to thank these expert commentators and the team at New Horizon Asset Management for their quick and important updates to a challenging situation.
As always, please remember that financial decisions should be made with careful consideration of individual circumstances and professional advice, I am here to support you.
If you have missed any previous news and updates these can all be found on the archive page here.
If you have any questions please use the the below channels, or the booking system – always drop me a quick message if you need a time slot outside of those available.
Mobile & Whatsapp: +33 6 87 13 68 71
Email: peter.brooke@spectrum-ifa.com
Facebook: Peter Brooke – Financial Advice
Calendly: https://calendly.com/peterbrooke/30min
By John Hayward
This article is published on: 7th April 2025
As of 6th April 2025, several significant changes to inheritance tax (IHT) laws have been implemented in the United Kingdom. For the purposes of this article, I will focus on those people that I deal with in the main, namely UK nationals who are tax resident in Spain.
From a UK perspective, under the new rules, an individual will be classified as a “Long-Term Resident” (LTR) if they have been UK tax resident for at least 10 out of the previous 20 tax years. LTRs will be subject to IHT on their worldwide assets. Conversely, UK nationals who have lived in Spain for 10 out of the previous 20 years will only be liable for IHT on UK-situated assets.
For individuals planning to leave the UK, there will be a “tail” period during which their worldwide assets remain subject to UK IHT. The duration of this tail depends on the number of years the individual was UK resident, ranging from three to ten years.
Inheritance Tax threshold freeze
The IHT threshold, the nil-rate band, which determines the value above which estates are subject to tax, is frozen until 2030. In other words, the value of an estate may increase but the allowance will not. The threshold for the majority of those affected is £325,000. This means that estates valued above this threshold will be taxed at 40%. As there is an inter-spouse exemption in the UK, the surviving spouse will normally inherit the deceased’s allowance creating an allowance of £650,000. There is no such exemption in Spain but, depending on where someone lives in Spain, a beneficiary might be eligible for an allowance to be applied. These (Spanish) tax rules have changed regularly over the two decades that I have lived in Spain and so it is probably wise not to put too much reliance on them for long-term financial planning.
Inclusion of pensions in Inheritance Tax
Beginning in April 2027, pension funds will be considered part of the assets subject to IHT. This means that pension funds outside the UK could be exempt. At the same time, the UK has recently introduced a 25% charge for moving pension funds to overseas schemes (QROPS). Although this might appear to put the final nail in the coffin of the overseas pension transfer market, there could be a Lazarus moment. In simple terms, if a UK based pension fund is valued at £1,000,000 and is moved to QROPS, the fund would reduce to £750,000 after applying the 25% charge. For those who prefer skiing (spending the kids’ inheritance) the same fund left in the UK pension could be subject to a 40% IHT charge, obviously more than if the fund had been transferred with a 25% charge. Growth assumptions and other factors will need to be considered but overseas transfers cannot be ignored.
How UK and Spanish IHT apply to Spanish compliant bonds
As we can see, assets in the UK will be subject to UK IHT. Why not just move cash from the UK to Spain? The problem here is that this opens the Spanish tax door.
As well as bank deposits, there might be ISAs and other UK investment plans which will be subject to UK IHT. UK advice has been restricted since Brexit and, for most tax residents of Spain, holding certain assets in the UK is simply not tax efficient. But moving everything to Spain could also cause problems.
Investment options
We arrange investment bonds, often referred to as Spanish compliant bonds, which are recognised as insurance policies and benefit from the favourable tax treatment in Spain even though they are not situated in Spain. The bonds we recommend are based in Ireland and Luxembourg, both in the EU, satisfying Spain’s conditions. For Spanish IHT, Spain will tax the individual receiving the benefit if either a) the beneficiary is resident in Spain or b) the asset is in Spain. This means that a UK resident beneficiary will not pay Spanish IHT on the bond. Equally, if the deceased is a non-Long Term Resident of the UK under the new rules, the bond will not be part of a UK IHT calculation.
The main aim of a Spanish compliant bond is to increase the value of the underlying investment whilst putting clients in a position to supplement their income. Of course, any investment should reflect the tax regime of the country that the person is resident in. The bonds can move with the individual for these purposes. For example, whilst a resident of Spain, the Spanish tax deferral rules apply. If the person moves back to the UK, the UK rules then apply with the added benefit that tax relief available in respect of time spent outside the UK.
For more information on how we can help you position your money in the most tax efficient manner, contact me at john.hayward@spectrum-ifa.com or (0034) 618 204 731 (WhatsApp).
By Portugal team
This article is published on: 5th April 2025
Offering generous tax incentives, including tax-free pension income (later taxed at 10% from April 2020), tax-free interest and dividends, and the ability to generate certain capital gains free of tax, Portugal´s popular Non-Habitual Residence
(NHR) scheme has been attracting new residents to Portugal since 2008. The NHR scheme was canceled with effect from October 2023, but some individuals were still able to qualify under the transitional rules up until 31st March 2025.
In its place, a new initiative has been introduced: the Incentive for Scientific Research and Innovation (IFICI), informally known as “NHR 2.0.”
While the new IFICI scheme was legislated to take effect from January 2024, practical implementation was delayed until February 2025, when the necessary forms and procedures were made available. With applications now open, many are wondering: What are the benefits and who is eligible?
In many ways, NHR 2.0 is even more attractive than its predecessor. Under the previous scheme, specific conditions applied for foreign income and gains to be tax-free. However, under NHR 2.0, all foreign-sourced income and gains are exempt from Portuguese tax, with the exceptions of pension income and income from blacklisted jurisdictions.
Additionally, similar to the old regime, NHR 2.0 introduces a 20% flat tax rate on employment and self-employment income derived from qualifying industries and activities.
To qualify for the new scheme, individuals must be tax residents of Portugal from January 1 2025 and must not have been tax residents in Portugal for any of the previous five years. Those who have previously benefited from NHR 1.0 or Portugal’s tax regime for former residents are not eligible to apply.
Although the tax benefits are generous, the eligibility criteria has been tightened, making the scheme more industry-focused. However, recent expansions to the list of qualifying activities have widened access, particularly benefiting business owners. Notably, UK business owners could find this scheme attractive, as it may allow them to receive tax-free dividends and potentially sell their businesses without incurring tax liabilities in either the UK or Portugal.
Meeting Portugal’s eligibility requirements is just one part of the equation; ensuring compliance with UK tax rules is equally critical. The key factors to consider include:
1. Limiting Time Spent in the UK
To take full advantage of the tax benefits of NHR 2.0, individuals must carefully manage their time in the UK. Many assume a 90-day limit applies, but the actual threshold varies depending on personal circumstances. The UK statutory residence test, introduced in 2013, determines UK residency status and can limit stays to as little as 16 days in some cases, or as many as 182 days in others.
Given the complexity of these rules, tracking travel days across Portugal, the UK, and other jurisdictions is crucial.
2. The UK’s Five-Year Anti-Avoidance Rule
This rule prevents individuals from temporarily leaving the UK to realise income or capital gains tax-free before returning. To avoid UK tax liabilities on income or gains realised abroad, individuals must remain non-UK residents for at least five years.
Applications for NHR 2.0 registration must be submitted by 15th January of the year following the year of Portuguese residency. However, individuals becoming residents in 2024 have an extended deadline until March 31, 2025.
While this article provides an overview based on current regulations and practices, tax laws can change with little or no notice.
As such, seeking professional advice tailored to individual circumstances must always be sought.
With over 35 years’ experience, Debrah Broadfield and Mark Quinn are Chartered Financial Planners (Level 6) and UK Tax Advisers specialising in cross-border advice for expatriates. For a complimentary initial consultation please contact +351 289 355 316 or portugal@spectrum-ifa.com. Alternatively, visit www.spectrum-ifa.com.
By Katriona Murray-Platon
This article is published on: 4th April 2025
The clocks have gone forward, winter is officially over and the lovely sunny weather seems finally to have arrived. Spring has sprung but of course April also hails the beginning of tax season in France and the start of the new tax year in the UK, bringing with it new financial laws and measures.
The costs of buying a house in France are usually bourne by the purchaser. Most of these costs are taxes which are paid to the state, the department and the town/village (commune) but there is also the Notaire’s fee which needs to be taken into consideration. The amount taken by the department is usually around 3.8% of the purchase price but the department councils can decide to amend this rate every year and increase it by between 1.2% and 4.5% maximum. This maximum amount can then be increased by a further 0.5% to make it 5% as from 1st April 2025 and 31st March 2028 (Article 116 of the finances law for 2025, no2025-127 of 14.02.2025).Paris has already decided that this 5% rate will apply to deeds of sale signed as from 1st April. The date upon which these rates come into effect will depend on when the council notifies its decision to the tax authorities.
Some departments may decide to reduce or even not apply this rate. However first time buyers are exempt from this rate and will pay no more than 4.5%.
The measure introducing the lower VAT threshold of €25,000 has been postponed until 1st June 2025. VAT will apply to auto entrepreneurs as soon as their turnover exceeds €27,500 (if their turnover was less than €25,000 in 2024). If their turnover is less than €27,500 in 2025, the VAT will be due from 1st January 2026.
As from 2nd April, those people with EU, EEA or Swiss citizenship, must have an Electronic Travel Authorization (ETA). This will cost approximately €12 and can be obtained from the UK ETA app or the GOV.UK website.
If you need to take a taxi or ambulance to go to the hospital or return home you may have to share your journey with another patient. The aim of this measure is to reduce costs for the health care service. Two patients may be required to share a taxi or ambulance for part or all of the journey if the prescription specifies that the health of the patient would not be jeopardized by sharing the transport with someone else. However this can only apply if the detour to collect the other patient is no more than 10 km per patient and up to 30km maximum. Also the waiting time for the taxi/ambulance before or after the appointment cannot be longer than 45 minutes. This only applies for medical visits to treat certain kinds of conditions such as cancer, chronic liver failure etc. The patient can refuse to share their taxi or ambulance but will not be covered by their mutuelle and will not be fully reimbursed.
The online tax declaration service will begin from 10th April 2025. Although the tax form doesn’t change dramatically from one year to the next, there can still be small changes which will not be known until the declaration service starts after 10th April.
Also, if this is your first time doing your tax return, you will need to submit a paper return.
The downloadable versions of the forms will also be available after 10th April.
After a busy March, I am set for an even busier April with plenty of appointments in my diary. I am looking forward to driving through the beautiful French countryside and catching up with my clients. If you have any questions and would like to make an appointment with me to discuss your financial situation, please do get in touch.
By Peter Brooke
This article is published on: 30th March 2025
“Risk” is an unavoidable, and sometimes welcome, part of investing so having a better understanding of the different forms of risk can help investors make informed decisions that align with their financial goals. In this (quite long) article, we explore key types of “risks” and how they impact financial planning.
Definition: The possibility of something bad happening!!
Definition: The degree of uncertainty and/or potential financial loss inherent in an investment decision.
So we need to frame our conversations about “RISK” by trying to understand the ‘something bad’ in every decision we make.
Inflation Risk: The risk of doing nothing!
A.K.A. – The Erosion of Purchasing Power
Inflation risk occurs when the value of money declines over time, reducing its purchasing power.
For example, if inflation averages 2.5% per year, €100 will only buy €53.10 of goods in 25 years’ time.
To counteract inflation risk, investors should turn to non-cash assets like shares and bonds, which have historically always outpaced inflation over the long term.
What’s the something bad? – The risk of doing nothing and leaving money in a bank account will guarantee a financial loss over the long term.
Permanent and Total Loss of Capital
Companies can and do ‘go bust’ and for an investor in those company’s shares this would mean a total and permanent loss of capital – the share price falling to zero.
Therefore understanding how a company is managed and investing across a diversified group of high quality companies will minimise this risk.
Outsourcing to a fund manager to diversify this risk is a great way to ‘avoid the losers’ even if you don’t always ‘own all the winners’.
What’s the something bad? – Investing in just one or a few companies and not understanding the ‘fundamentals’ of each investment.
Volatility: Fluctuations in Values
Volatility is often ‘defined’ as RISK with respect to investments.
Volatility refers to short-term fluctuations in the price of an investment; for example a share price.
While dramatic drops can be unsettling, history shows that volatility is entirely normal and markets always recover over time.
For example, look at the chart below; since 1980, the US stock market (S&P 500) has experienced declines averaging 14.1% during each year, yet annual returns were positive in 34 of those 45 years (75%).
The red figures show the largest market drop in value for each year and the grey bars show the total return for that same year… for example 2024 shows a drawdown of 8% but the S&P 500 finished the year 23% up.
Volatility is NORMAL and does NOT mean a capital loss for the long term investor.
Volatility risk is mitigated by TIME in the market
Volatility is part and parcel of investing, and your investment time horizon almost without exception determines the likelihood of investment success. This chart shows the annualised returns over four different time frames (1, 5, 10 and 20 years) using data from 1950 to today.
A 50/50 portfolio of shares and bonds (the green bar) shows that in the last 75 years you could lose up to 24% or gain up to 49% in any given one year period.
However, over every 10 year rolling period in that same 75 years, your worst possible return would be 1% p.a, (ie. no loss) and the best would be 17% p.a.
The longer the investment term, the less relevant volatility becomes, and crucially, the longer the investment term, the greater the likelihood of investment success.
What’s the something bad? – Not maintaining a long-term perspective and reacting impulsively to market swings.
Longevity Risk: Outliving Your Wealth
With increasing life expectancy, investors must consider the risk of outliving their assets.
For a couple aged 65 today there is a 92% chance that one of them will live to 80 and a 49% chance one will live to 90.
Planning for a longer retirement by investing must now include more exposure to growth-oriented assets.
Sequencing Risk/ The Timing of Returns Matters
For retirees or those drawing an income from investments, sequencing risk— the order in which returns occur— can significantly impact portfolio longevity.
A market downturn early in retirement can lead to a faster depletion of funds compared to a downturn later in retirement.
Strategies like maintaining a cash reserve, actively managing portfolio risk as you approach retirement and diversifying investment assets will help.
What’s the something bad? – A market correction just at the point of retirement can significantly impact the quality of that retirement.
ROMO – The Risk Of Missing Out: The Cost of Not Investing
As well as the risk of not keeping up with inflation, there is also a significant risk (and great financial cost) in staying out of the market.
The ‘magic of compounding’ delivers substantial rewards for the patient, long term investor.
The 8 – 4 – 3 Rule
Here is a table showing the compounding effect of a 7% annual return:
What’s the something bad? – The risk of doing nothing and not benefiting from compounding returns.
Currency Risk
Expatriates often have assets in one currency but expenditure in another; for example a Pension in British Pounds and outgoings in Euros.
As global investors there will always be some form of underlying currency risk but mitigating the practicalities of moving money around from one currency to another is possible with careful planning.
Options could be:
What’s the something bad? – The risk of not correctly matching your assets with your liabilities – a large fluctuation affects your lifestyle.
Assessing Your Attitude to Risk:
All of the above is to help our conversation about ‘RISK’ but in order to best set up and review your investment portfolio we have a 3 part process to determine exactly how much investment risk you can tolerate:
1. Your ATTITUDE to risk – this is a psychometric test, via a questionnaire, to assess your in-built view on risks, volatility and returns.
2. Your CAPACITY to take risk – this is a deeper understanding of your overall situation and therefore your ability to weather ups and downs in portfolio values… i.e. do you have other assets, a large pension or property income; how reliant are you on your portfolio at any given time?
3. Your TIME HORIZON for investing – when do you need to access to this money? Will the access be to draw an income or large lump sums or even, all of the fund in one go? Or is this money just to be invested to pass on to beneficiaries?
The answers to these 3 questions provide us with a ‘score’ and ‘understanding’ of how you will use the money being invested… this allows us to assign a ‘Risk Benchmark’ to your portfolio, from which we will determine its asset allocation and then monitor its performance and volatility for the duration of the investment.
Obviously, your TIMESCALE changes over time and your CAPACITY can change as your life situation changes; even if you maintain the same inherent ATTITUDE to risk we must always review and monitor the overall position of your portfolio and potentially change your benchmark as time passes.
Final Thoughts
Investing always carries ‘risks’, but knowledge and strategy can help manage them effectively. Whether it’s inflation, market fluctuations, or longevity concerns, working with a financial adviser ensures that risk is considered within a well-thought-out plan. Overall doing nothing is the largest risk.
Staying focused on long-term goals, and avoiding emotional reactions to short-term market movements, usually leads to successful financial outcomes.
I would very much like to thank the team at RBC Brewin Dolphin for their kind input and help with this article, I truly hope you found it useful.
If you’d like to discuss your investment strategy and how to manage these risks, feel free to get in touch!
By Alan Watson
This article is published on: 25th March 2025
Join our expert panel on Thursday 27th March
18.00 (GMT), 19.00 (CET)
An informative webinar where our panel of experts will address topics such as relocating to France, mortgage, visas, buying and living in France, and currency transfers. We will also provide insights into the buying process in France.
By Jeremy Ferguson
This article is published on: 24th March 2025
Historically, the concept of “domicile” has been central to determining UK Inheritance Tax obligations for British citizens. Many British expats found that despite decades abroad, they were still deemed UK domiciled on their demise, exposing not just their UK assets but their global estates to UK Inheritance Tax.
New rules which soon come in to effect mark a major shift in this area, particularly impacting British expatriates who have been living overseas for extended periods, replacing the concept of domicile with new long-term residence (LTR) rules. Under these new rules, the test for liability to UK Inheritance taxes will be based on your residency.
For those of you who have lived outside of the UK for at least 10 of the last 20 years, you will now be classified as non-UK long-term residents. This change means your global assets (except UK based holdings such as pensions, property, investments and bank accounts) will be exempt from UK Inheritance tax.
Therefore, if you are intending to remain out of the UK indefinitely or you have already been out of the UK for more than ten years, you should seriously consider moving assets outside of the UK.
As an example, if you hold funds in a UK bank account in GBP then these will remain subject to the old IHT rules as they will be classed as a UK asset, so if the monetary amounts are substantial enough, it makes perfect sense to move these funds outside of the UK. This is something we can help you with by explaining what options are available and where the best interest rates can be found. (This could even offer you the chance of deferring annual taxes here on any interest earned).
On one hand they giveth, however on the other hand they taketh away
An expression many of you will be familiar with. For those of you who watch the UK news, many will be familiar with the plight of the UK farmers who are up in arms about the change in the tax treatment of their farms on inheritance. What amazes me is the fact that in the same budget, the Government announced that UK pensions are now going to form part of your assets assessed for Inheritance taxes, whereas previously they were exempt. I explained earlier about the favourable changes if you live outside of the UK, so on one hand they giveth, but now your pension will be subject to UK Inheritance tax, they taketh away!
This is a real sting in the tail if you have planned to leave your pension to your children due to the tax efficiency this previously offered. If we look at the worst case scenario under the new regime, you have a UK pension and pass away after the age of 75, your beneficiaries could now be hit with a 40% UK Inheritance tax charge and on top of that there could be further tax liabilities when they choose to take income (of up to another 45%…….). I am simply amazed that these facts aren’t getting the column inches the farmers are getting. Again, because of this there may be sense in moving as much of your pension out of the UK scheme as possible.
As with anything as important as this, planning and taking action could save you and your family a fortune in unnecessary taxes. We are here to help explain the issues, sensible ways to deal with them and ultimately helping you to make a well informed decision as to what you should or shouldn’t do..
By Richard McCreery
This article is published on: 19th March 2025
France is a great place to live and I’ve enjoyed every minute of my 25 years here. It’s not always easy living in a foreign country, especially in light of the Anglo-Franco relationship through the centuries (I had never realised that the French were so upset about what the English did to Jean of Arc until I joined the events committee in my village), but there are things we can do to make it is a little easier.
I always recommend expats learn to speak at least a little French and tell them not to worry about making mistakes. An attempt to communicate is always appreciated even if your grammar isn’t perfect. Always say ‘Bonjour’ upon entering a shop or a lift, ‘Au revoir’ when leaving. We might not always do it in the UK but some French people get really annoyed if you forget. And always look both ways when crossing the street, even if it is one way. French drivers often treat the rules of the road more like guidelines.
Expats coming to live in France should also not assume that the French approach to finances and taxes are similar to where you’ve come from. If we think about how complicated these subjects are even in our home country, then you won’t be surprised to hear that they may not be entirely straightforward in France either. Often there are differences that you might never have considered, some are small but some are so substantial that they could add up to hundreds of thousands of Euros.
That is why I’m going to share a few tips for managing your finances and making life in France smoother and less stressful.
By Gareth Horsfall
This article is published on: 10th March 2025
I didn’t intend on starting this E-zine with information about the house and country life talk, but this morning I awoke to the most beautiful sunny day, the first for a while, and whilst the man is at work doing the ‘potatura’ of the olives, I just couldn’t resist taking a photo of the beautiful daises which have popped up on the land. It’s like a fresh spring meadow!
The grass is starting to grow again and I was thinking about cutting it, at least outside the front of the property, but then I thought to myself why would I want to spoil such a beautiful thing? So, for now the grass can grow and the wild flowers can enjoy their moment in the sun. As mentioned, the man is now here doing the potatura of the olive trees and thinks it will take him about 20 days! He is on his own, but seems to have a passion for it. I daren’t go and stay too close to him otherwise, I keep him chatting and I don’t want him to have to take more then 20 days given the amount of work that is required for his sake more than mine.
Anyway, that’s a short update on the property and land. I have also just returned from a short trip to the Big Apple, NYC. My son was performing in a piano competition and got invited to play at Carnegie Hall and also the Italian Cultural Institute of NYC. What an experience for a 15 year old….and he won his age group competition! We are, quite frankly, in shock. Onwards and upwards I guess.
One thing I noticed in NYC was the cost of living. Now, I will caveat the following comments with the fact that we were staying near Times Square so I imagine there is a certain % you can add to the price of goods and services for being in such a touristic spot, but the price of basic goods in America now is very high. One day I went to the 7 Eleven and bought 2 bottles of water, a container with about 20 grapes in it, a banana, 2 cups of tea and a box of biscuits and left the shop $40 (€37) less in my pocket. Compare that to a shop at the local grocery shop in Amelia this morning and I got about 3 kgs of oranges, 2 kgs of apples, 2 fennels , 2 lettuces, 1/2kg of green olives, a pineapple, some tomatoes and about 2 kgs of lemons and it cost €21 ($22). A huge difference! We also met some American family members for a day in NYC and they confirmed that it is almost more expensive to buy fresh produce and cook at home than it is to eat at a diner.
I have made reference to this in a few videos which I have on my YouTube channel, (https://www.youtube.com/@Gareth-Spectrum) but to experience it first hand was quite something. Needless to say we gorged ourselves at the diners!
My last comments before I go onto the main subject of this E-zine are on President Trump.
It is certainly an interesting time and a few people have called/messaged to ask what I think.
Firstly, the debacle at the White House with President Zelensky was quite the scene!!
I watched the whole meeting after initially seeing a few short video clips and it was quite difficult to watch, if I am honest, but to be fair to President Trump he was hammering home the message about peace and stopping the deaths on both sides. I am not exactly sure what President Zelensky’s objective was but it certainly didn’t sit well with the Trump team. In the end I presume that America will get what it wants. It’s doubtful it won’t and if Pres. Zelensky has managed to garner support in the UK and France and the wider but it remains to be seen how they can spport Ukraine either financially or militarily without the US.
Whilst I don’t like Donald Trump in the slightest, if he manages to stop the wars, killing (on both sides) and find some sort of peace deal, then that has to be good for everyone, in my opinion.
There is also the tariff war which appears to be now in full swing; I saw that he announced the other day that the Taiwan Semiconductor Manufacturing Company had committed to investing $160 billion in a new production facility in the US. Also, Trump reiterated in his recent address to Congress that if companies want to avoid tariffs on goods into the US then all they need do is relocate production to the US itself. Therefore, it would seem like the message is clear and I expect more businesses to relocate production /invest in the US as a result. It will likely stimulate US small and mid sized companies and US consumers are more likely to turn to home produced products than those more expensive products brought in from abroad.
So, moving on from my travels, country experiences and President Trump , in this E-zine I am dedicating it to the new rules on inheritance tax which were introduced by the UK government in October 2024. (Please accept my apologies that it has not been sent until now, but there have been a number of clarifications which we have been waiting for, but which are yet to transpire. The UK government is seeming more like the Italian one every year with announcements which have not been fully thought through and which then get slowly modified and tweaked as the years go by, only for there to be numerous potential pitfalls which could lead to legal cases, until matters are clarified).
However, despite this we have a fair idea of what the new rules entail and of which I will detail below.
(thanks to Jessica Zama at Russell Cooke solicitors in the UK and Barry Davys, my colleague in Spain, who provided their summaries of the changes as well).
Writing the words ‘ bearing gifts from the tax man’ is not something which I am very used to. In fact, 99.9% of the time it is quite the opposite. However, in this case it might just be that, as Brits’ living abroad or anyone with UK citizenship living outside the UK for more than 10 consecutive years, you may be able to reduce inheritance tax liabilities significantly with some careful planning.
It could be as easy as following a few basic steps.
BACKGROUND
The UK has an Inheritance Tax system where the estate of the deceased is assessed based on worldwide assets if they were considered ‘domiciled’ in the UK at the time of death. The term domicile and its meaning has been the important factor to consider up to now, and in the UK it has a different meaning to “resident” or “residency”.
Domicile in the UK is different from the Italian “domicilio”, which is akin residence. The test of where one is tax-domiciled is to establish the jurisdiction in which an individual is most connected to, and would be very much influenced by where that person intended to live the rest of their life. If, upon a death, a person was considered “deemed domiciled” in England by the HMRC, inheritance taxes in England (“IHT”) would be applicable on that individual’s worldwide assets. This would be regardless of where the deceased was physically resident at the date of their death.
This meant that even if you left the UK 30 years ago to live in Italy, if HMRC for any reason considered that you were most closely connected to the UK and therefore “deemed domiciled” in that country, your estate would not only be taxed on your worldwide assets in Italy, or in whichever country you are resident at the time of death, but also in the UK, where inheritance taxes are far higher.
This concept has caused much confusion over the years and not least caused issues for professionals who could not give their clients a straight answer when providing estate planning advice, as to whether they would be considered deemed domiciled upon death. HMRC could not provide any guarantees as to what the final decision would be upon death.
Fortunately, the 2024 Budget has changed these rules, which will provide more clarity as to whether a person’s beneficiaries are going to have to pay IHT on the deceased’s worldwide assets.
The concept of “deemed domiciled” will disappear, and a new residence-based system will take its place. An individual will be considered a “long term resident” if they have lived in England for 10 out of the past 20 years; these years do not have to have been consecutive, and one will simply have to add up all the years that the individual has lived in the UK in the past 20 years, to see whether they are considered long-term resident. If they have, then their estates will be subject to IHT.
Generally speaking, that individual will continue to be considered long-term resident in the UK for ten years after they have left the UK, as there is a “tail”, this is a tapering, and this ‘tail’ is shortened if you lived in the UK for less than 20 years. The length of his tail will depend on the years actually lived there.
But , if you have lived outside the UK for more than 10 CONSECUTIVE years, your non UK-assets will not be liable to UK IHT. The rule is as follows :
The benefit will depend on our personal circumstances, where your assets are based, where, potentially, they are being managed from, and the value of your assets.
The case study below illustrates:
Mr & Mrs Bloggs
Assets outside the UK include Italian compliant bonds, bank accounts, QROPS pension and a property, all jointly owned, as follows:
| Italian bank accounts | €33,000 |
| Italian compliant bonds | €580,000 |
| House (mortgage free) | €525,000 |
| QROPS pension | €345,000 |
| TOTAL | €1,483,000 |
Under the new rules, Mr and Mrs Bloggs can return to the UK and if death occurs within 10 years of the return the following will apply.
The savings from NOT having these assets taxed in the UK would be a whopping £593, 200. (£1,483,000 * 40%)
Complete more than 10 consecutive years outside the UK, then return to the UK and be unfortunate enough to pass away in the next 10 years and your estate will get the following additional benefits (on top of being IHT exempt on non-UK assets):
If you pass away outside of the UK and your beneficiaries are in the UK, they will pay no UK IHT if you have met the long term non-resident criteria. This is because your non-UK assets will not be taxed in the UK. As the UK government taxes your estate, not the beneficiary receiving the bequest, no IHT will be payable.
And because you live in Italy, your UK based beneficiaries will be assessed on their residency and as they are outside Italy they will not have to pay Italian IHT on non-Italian assets.
1. Take professional advice
2. Don’t move back to the UK until you have more than ten consecutive years out of the UK.
3. Keep your investments outside the UK outside if you qualify under the new residency test.
4. If you are planning on making Italy your home for more than 10 consecutive years then plan to move your assets away from the UK financial system and plan like a European, for example ISA’s, which are not tax free in Italy anyway. There is now merit in disposing of them in favour of non- UK situated assets.
5. Pensions in the UK are liable to IHT from April 2027 and it is therefore doubly important to keep non-UK pensions beyond the scope of IHT.
Unfortunately, the possibility of moving pension assets away from the UK has now finished as the UK government also imposed, in the same budget, a 25% tax surcharge on pensions transfers outside the UK. However, not having the pension managed by a UK financial adviser (who shouldn’t anyway due to regulatory issues), and also the assets managed by an EU based manager and/or invested in non UK domiciled assets, should prove that links to the UK have been separated as much as possible.
6. When drawing income or capital from your investments and pensions, take advice on the manner and order in which you do this, as it makes a difference to your IHT exposure and also how long your savings will last.
*** An additional note about invested assets is probably worth a mention here. One of the criteria for determining UK deemed residency for IHT purposes under the new rules is something called UK-situs assets. i.e those assets which you hold in the UK. The obvious asset to mention here is property. Owning UK property could mean you fall within the scope of the new residency rules as UK resident for IHT purposes. However, less obvious things could also fall under this rule, i.e having assets managed in the UK by a UK based financial adviser and/or asset manager or even having an active bank account in the UK.
Whilst we are waiting for further clarification on these points it is thought that these could fall into the realm of ‘grey area’ awaiting a legal judgement. Hence, for this reason we would recommend that wherever possible you start to move your banking and/or invested monies across to EU licensed and authorised financial professionals to be managed, if you are intending on a long-term or permanent move away from the UK.
By Peter Brooke
This article is published on: 7th March 2025
I’m always looking for ways to improve how we can work together, ensuring that your financial planning experience is seamless, efficient, and tailored to your needs. To that end, I am excited to share some recent technology updates that will enhance our communication and collaboration.
These two new enhancements add to the suite of tech tools I am already using to save time, improve communication, improve my efficiency in dealing with follow up tasks and provide you with the best financial planning service possible.
Spectrum advisers and our clients are spread across Europe and so we have invested into an innovative virtual office via App.Spatial.chat to offer a more interactive and engaging way to meet remotely. This platform allows for an easy to use virtual face-to-face experience, making it easier for us to discuss your financial plans in a comfortable, secure setting – whether you’re at home or on the go.
This tech does not replace face-to-face meetings but offers us another way of meeting. I will be offering this as an invite option via my Calendly Booking system as well as zoom, teams, telephone calls and, of course, face to face meetings.
When you enter the Spectrum Virtual office, as a guest, you will see a brief introduction as to how it works, you can then enter the main office or any of our ‘country’ offices, via the list on the right hand side of the screen.
Our meetings will be conducted in my own personal office which is password protected so we have complete privacy from anyone else who might be online at the time.
I look forward to seeing some of you there over the coming months.
To ensure I capture every important detail during our discussions, I will now be using Otter.ai to record virtual and even live face to face meetings, with the agreement of my clients.
This tool allows me to create accurate transcripts of our conversations, helping me stay fully aligned with your financial goals and ensuring that nothing is overlooked.
Rest assured, all recordings and transcriptions will be handled securely, I permanently delete each one as soon as I have downloaded the transcribed notes and follow up to task lists, maintaining strict confidentiality in accordance with data protection standards.
Click on the following image to view a brief introduction to Otter
If you prefer for me not to record our meetings, please say so, and I will turn off the tech. Likewise, if you want me to send you the notes I would be very happy to.
Cash Calc Secure Client Portal for data gathering, expense tracking, document sharing and even secure messaging: https://the-spectrum-ifa-group-1002.cashcalc.co.uk/register?ref=MTIzMTU=
Calendly booking system for easy call and meeting booking linked straight to my diary https://calendly.com/peterbrooke/30min
DocuSign and Adobe Sign – these allow me to send you paperwork to sign digitally and securely to save us all time and the requirement to print and post documents.
The future of finance is undeniably tech-enabled. By embracing AI and support tools like these, we plan to remain competitive, agile, and customer-focused.
Feel free to get in touch if you have any questions via the below channels, or the booking system – always drop me a quick message if you need a time slot outside of those available.
If you have missed any previous emails, click here to access the Archive.
For now, have a great day, speak soon…
