For income tax and capital gains tax (CGT) purposes, the tax year runs from 6 April to the 5 April of the following year.

If an individual wishes HM Revenue & Customs (HMRC) to compute their income tax liability, the tax return filing date is 31 October. If the tax liability is calculated by the individual, however, the filing date is the 31 January following the year of assessment (for example, for the financial year ending 5 April 2021 the filing dates are either 31 October 2021 or 31 January 2022).

Most employees pay tax under the Pay As You Earn (PAYE) system. The employer deducts tax from source acting as an agent for HMRC. If the employee has additional taxable income (for example, from investments or capital gains) a self-assessment return may need to be filed, within the deadlines highlighted above.

Irrespective of the two filing dates the tax payment dates are not altered. Income tax and CGT are payable on 31 January following the year of assessment. However, two advance payments on account will need to be made each year unless either:

The payments are payable in two equal instalments amounting to half the previous year's tax liability. Payments are due by 12.00 midnight on:

Inheritance tax (IHT) arising on the event of an individual's death is due on the earlier of either:

However, interest charges will only start to apply after the six-month period.

IHT due on a chargeable lifetime transfer will be due on the later of:

IHT due as a result of certain trust events will be due six months following the end of the month in which the event occurred.

If any of the above scenarios involves "qualifying property" a claim can be made to pay the corresponding proportion of IHT in instalments. Qualifying property typically cannot be converted easily and quickly into cash. Such property includes (among other things):

This will result in the tax being payable in ten equal annual instalments with the first payment due on the appropriate deadline above.

Depending on the nature of the assets, interest may be charged on the outstanding instalments from the date which the first instalment is due.

If the qualifying property is sold, any IHT instalments outstanding will become immediately payable in full.

A company's tax payment deadline is dependent on the taxable profits generated and the accounting period of the company. The payment deadlines are therefore as follows:

The concept of domicile has developed through English case law and its meaning is distinct from that in other jurisdictions.

There are three common law categories of domicile:

Strong and decisive evidence is required to demonstrate a change in domicile and to demonstrate an intention to reside permanently and indefinitely in a jurisdiction.

If an individual can demonstrate a clear intention to leave the UK upon the occurrence of a clearly defined and anticipated future event (such as their retirement), this can counter claims they have acquired a UK domicile.

A UK domiciled (or deemed domiciled (see below)) individual is subject to IHT on all their worldwide assets. An individual who is non-UK domiciled (and is not deemed domiciled in the UK ) is only subject to IHT on:

UK domiciled (or deemed domiciled) residents will pay income tax and CGT on their worldwide income and gains. An individual who is non-UK domiciled (and not deemed domiciled) but who is resident in the UK is subject to the following taxation regime:

The individual may have to pay a remittance basis charge (RBC) to claim the RB. There are two levels of charge (from 2017/18 tax year onward):

A claimant must nominate the foreign income or chargeable gains by reference to which the RBC is calculated.

Deemed domicile is a statutory creation designed for UK tax purposes only rather than a "common law" concept. An individual may, for example, have a common law domicile of origin in a jurisdiction outside the UK but, concurrently, be deemed domiciled for UK tax purposes. The deemed domicile rules apply to IHT, CGT and income tax and their application varies according to the tax under consideration. Key factors determining the application of the deemed domicile rules include:

Various detailed, complicated rules apply in establishing deemed domicile and its effect on taxation, which are beyond the scope of the Q&A overview. For further information, see Practice Note: Deemed Domicile for Tax Purposes.

An individual's residence status is relevant in determining their UK income tax and CGT obligations as well as their domicile and deemed domicile position. The Statutory Residence Test (SRT), which governs tax residence in the UK, was introduced on 6 April 2013 (prior to this, different tests applied).

For the purposes of the SRT, individuals are categorised as either an:

The SRT contains three parts for determining whether an individual is resident in the UK in a given tax year:

There is no exit tax for an individual who leaves the UK and becomes non-UK resident. The UK has a residence-based system of taxation, which means that renouncing British citizenship would not preclude an individual's liability to UK income tax and CGT.

A UK-domiciled individual who leaves the UK may continue to be domiciled in the UK either under common law rules or statutory rules deeming an individual to be UK domiciled in certain circumstances for tax purposes (see Domicile and Residence).

The position is different, however, for trusts and companies. Where a UK-resident trust or company becomes non-UK resident, an exit tax in the form of CGT or corporation tax charge may be imposed.

Under the SRT, residency is determined by a number of tests and influenced by different factors (see Question 2, Residence). It is possible for a person who is only temporarily resident in the UK to become UK resident under the SRT. This may be made more likely by factors such as having a second home or holiday home in the UK.

The SRT assesses UK tax residence for any given tax year and, if an individual is resident in a particular tax year under the provisions of the SRT, the default position is that they are UK tax resident for the whole of that tax year.

Under the split year rules, however, in some cases it is possible for an individual to claim that the tax year should be split into a period of UK tax residence and a period of non-UK tax residence. This can have a significant impact on any planning that the individual may carry out during the tax year. The split tax rules are, however, beyond the scope of this Q&A. For further information, see Practice Note: Statutory residence Test for Individuals: Split year treatment.

Foreign nationals (that is, individuals not resident in the UK for tax purposes) are not generally subject to CGT on gains on disposals of UK assets. However, there are some important exceptions.

Since 6 April 2015, non-UK resident individuals have been subject to CGT on gains on disposals of UK residential property.

In addition, since 6 April 2019, non-UK resident individuals have been subject to CGT on gains on both:

Where an individual owned the asset before the introduction of the relevant charge (that is, before April 2015 or 2019, as applicable) a rebasing applies to the asset's value. Residential property is rebased to its value on 5 April 2015, and non-residential land and interests in companies that directly or indirectly hold UK land are rebased to their value on 5 April 2019. However, an individual may elect for the actual cost of the asset to be used.

A non-UK resident individual who is trading in the UK through a branch or agency or a permanent establishment is also chargeable to CGT on UK-situated assets that are used in the trade or held for the purposes of the branch or agency.

Gains on residential property are taxed at 18% or 28% (depending on an individual's marginal rate of income tax). HMRC should be advised of the sale or disposal within 30 or 60 days of the completion (the latter for disposals after 27 October 2021).

All other gains (save for carried interest gains) are taxed at 10% or 20% (depending on an individual's marginal rate of income tax).

Subject to the concept of disregarded income (see below, Disregarded Income), the general position is that foreign nationals are subject only to UK income tax on UK-source income.

In the 2022/23 tax year, the tax rates are as follows:

Generally, foreign nationals (non-UK residents) are not entitled to the personal allowance, which is the first part of an individual's tax free income (GBP12,570 for the 2022/23 tax year). However, there are some exceptions, including for EEA nationals, and where the personal allowance is provided for under the terms of a double taxation agreement (DTA).

Disregarded income is a term that generally applies to non-UK resident individuals who will not be subject to UK tax liability on certain types of UK source income (for example, savings and investment income such as interest, dividends from UK companies, and pension income from a UK-registered scheme). This is because in the case of disregarded income, the non-UK resident's liability is limited to the amount of tax withheld from, or treated as deducted from or paid in respect of, such income. Where there is no withholding tax (or an exemption from withholding tax can be claimed), the non-UK resident will have no further tax liability on that income.

The UK imposes a withholding tax on yearly interest paid to a person whose usual place of abode is outside the UK. The person by or through whom the interest is paid is required to deduct tax at the basic rate (currently 20%) and account for it to HMRC. However, this is subject to many exceptions. A form of withholding tax also applies to employment income through the PAYE system.

Rental income from real estate situated in the UK is not disregarded income and any non-UK resident who receives such income will be subject to UK tax on that income. A non-UK resident individual has two options for paying income tax on UK-source rental income:

The NRL scheme requires income tax at the basic rate (currently 20%) to be deducted from rental payments due to non-resident landlords in respect of a UK property business and accounted for to HMRC. Income tax is either deducted by:

Alternatively, non-residents can apply to HMRC to receive the rental income gross and to report their tax liability under the self-assessment regime.

IHT is charged on death. Under section 1 of the Inheritance Tax Act 1984 (IHTA 1984), IHT is charged on the "value transferred by a chargeable transfer", which is calculated based on the loss of value to the donor's estate (that is, the value by which an individual's estate is reduced) rather than the value of the gift made. The reduction in value equates to the "transfer of value".

According to section 4(1) of the IHTA 1984, a charge to IHT can arise during both the donor's lifetime (as a chargeable lifetime gift, which includes gifts to certain trusts) or immediately upon their death (under UK law, a person is deemed to have made a transfer for the value equal to the value of their estate immediately before death).

The assets in an estate subject to IHT include:

(Section 5, IHTA 1984.)

It should be noted, however, that certain transfers made by an individual during their lifetime (such as gifts between individuals) will be potentially exempt transfers (PETs). These include:

If the donor fails to survive for seven years from the date of the gift, the gift will become chargeable to IHT at 40% subject to taper relief (see Question 8).

Certain assets may be excluded from IHT. This depends upon the type of asset, their location and the domicile/residence of their owners. Excluded property trusts, created by non-domiciled (or deemed domiciled) individuals before they become UK-domiciled and which hold non-UK assets, can also be advantageous for IHT purposes. See also Practice Note: Offshore trusts: inheritance tax.

There are four tax rates for IHT:

The NRB is the amount an individual can leave to beneficiaries before IHT becomes payable (currently up to GBP325,000). See above, Tax Rates.

Exemptions from IHT include:

Reliefs for IHT include:

See Practice Note: Tax data: inheritance tax, Main exemptions and reliefs.

Techniques to encourage IHT tax efficient planning, particularly on death, may include:

Since April 2017 an IHT charge applies to a UK residential property interest (UKRPI) held indirectly by (or for) a non-UK domiciled individual through either:

(Schedule A1, IHTA 1984.)

UKRPIs are no longer treated as "excluded property" for IHT purposes.

A UKRPI can include land consisting of a dwelling or an off-plan purchase (although certain exemptions apply to hospitals or schools).

The IHT will apply to all UKRPIs regardless of whether they are occupied or let. In addition, the value of certain loans or non-UK assets used as collateral to secure these loans, will also be subject to IHT, based on the extent that their value is drawn from or related to the UKRPI.

The sale/disposal of an interest may still be subject to IHT two years from the date of disposal. The application of this rule will depend on the nature of the asset involved (for example, whether it is a sale of shares in the offshore closed company or the repayment of a relevant loan after a UKRPI has been sold).

IHT is the only direct tax payable on death.

CGT is charged on those who make a "disposal" of a chargeable asset. A disposal can include the sale of an asset but can also include lifetime gifts and transfers to certain trusts. Death is not treated as a disposal and there is no charge to CGT at this point.

Income tax may be due on income received by an individual immediately before death or after death by their estate.

Stamp duty land tax (SDLT) is payable by a purchaser, on the acquisition of real estate in England. Different rates of SDLT apply depending on whether:

In addition, there are two main surcharges:

The Annual Tax on Enveloped Dwellings (ATED) applies to UK residential property worth over GBP500,000 when the property is owned by a company, certain types of partnership or certain collective investment schemes. ATED is payable by the property owner and the ATED charge is calculated using a banding system depending on the property's value.

The UK does not have a specific wealth tax. Plans to introduce one where recently discussed by the Wealth Tax Commission (an independent organisation with no connection to the government). After its report was published, the government subsequently announced it had no plans to introduce a wealth tax.

The tax rules applicable to English residential property have changed significantly in recent years. These changes have led to a greater alignment of tax rules for non-residents and residents in relation to real estate holdings. The landscape is therefore relatively neutral for non-residents and residents and the potential structures they would consider using.

Most commonly, non-resident individuals would consider acquiring English real estate personally or through a trust or company. The trust or company may be resident in the UK or resident outside the UK and, as noted above, in many regards, the tax treatment is relatively neutral. It can be tax advantageous to acquire real estate with borrowing if UK IHT is a consideration.

The intended use of the property will often be central to the decision as to how it should be held. For example, the use of a company may be advantageous for an investment property, but disadvantageous for a property which would be occupied by the ultimate beneficial owner or someone connected to them.

A UK-resident individual's liability to tax on real estate and other assets owned outside the UK will depend on the person's domicile (see Question 2).

A UK-resident and domiciled (or deemed domiciled) person is liable to income tax and capital gains tax on their worldwide income and capital gains. The person's worldwide assets would be within the scope of UK inheritance tax.

A person who is UK-resident but neither domiciled in the UK nor deemed domiciled may claim the "remittance basis of taxation" for income tax and CGT. If this is claimed, their non-UK income and capital gains would not be subject to UK tax unless the income or gains are remitted to the UK. The term "remittance" is broadly defined and includes bringing the income or gains to the UK or using them in the UK. If the remittance basis is not claimed, the person is liable to income tax and CGT on their worldwide income and capital gains. The person's non-UK assets would be outside the scope of UK inheritance tax.

The UK is signatory to an array of DTAs with more than 130 other jurisdictions. In particular, the UK has DTAs with much of continental Europe including France, Germany, the Republic of Ireland, Italy, Spain and Switzerland, as well as many of its Commonwealth partners, including Australia, New Zealand, Canada and South Africa.

Of particular note, the USA-UK Double Tax Convention was signed on 24 July 2001, amended by signed protocol on 19 July 2002 and entered into force on 31 March 2003.

The principal role of the tax treaties is to alleviate the potential for a "double" tax charge on the same income, gain or profit. Certain treaties, including ones with India, Pakistan, Italy and France, also provide relief from the taxation of gifts and inheritances.

The CRS was incorporated into UK domestic law on 15 April 2015 through the International Tax Compliance Regulations 2015 (SI 2015/878), which are subject to ongoing amendments. The Regulations implement the:

The Regulations (as amended) require UK financial institutions to:

The Regulations remain in force after Brexit. UK government legislation has confirmed that Brexit has not altered the due diligence and reporting obligations on UK financial institutions.

There is no requirement for an individual resident or domiciled in the UK to have a will in place.

An individual who dies without having executed a will, or who fails to dispose of their entire estate by will, is considered to have died "intestate." In such case their estate will be administered in accordance with Part 4 of the Administration of Estates Act 1925 (AEA 1925). It is therefore always advisable to have a will in place to ensure that the assets pass in accordance with an individual's wishes on their death.

The formal requirements for a valid will, regardless of nationality or domicile, are set out in section 9 of the Wills Act 1837 (as amended by the Administration of Justice Act 1982) (Wills Act 1837). The formal requirements are that:

Failure to follow these requirements may result in an invalid will and rejection of it by the Probate Registry.

The witness should not be a beneficiary or spouse of a beneficiary under the will, otherwise the will is read as though that beneficiary predeceased the testator. Those unable to be reliable witnesses or who may prove difficult to trace, such as minors or those who lack mental capacity, should not be chosen as witnesses.

A will can be written in any language.

The Wills Act 1837 (Electronic Communications) (Amendment) (Coronavirus) Order 2020 (SI 2020/952) (Order), along with detailed guidance allows wills and codicils to be witnessed virtually in England and Wales. The legislation was initially only in place for two years, but has recently been extended until January 2024.

The Order amends section 9 of the Wills Act 1837 with regard to presence and witnessing requirements. These requirements will now include virtual presence (such as voice conferencing) as well as physical presence when the will is being witnessed. Virtual presence is not extended to other elements of section 9 of the Wills Act 1837 (such as the testator's ability to direct someone to sign in their presence). Such activities must still be done in person and not remotely.

The remaining formal requirements for executing a will contained in section 9 of the Wills Act 1837 must still be complied with as must other legal requirements (for example, the testator must have mental capacity and not be subject to undue influence when the Will is drafted and executed).

In July 2020, the UK government published the Guidance on Making Wills Using Video Conferencing to assist with the implementation of the new legislation. The guidance also contains specific details on the practical procedures to follow if a will is being witnessed remotely.

There has been a cautious response to these proposals and their ability to produce a valid will (see www.step.org/sites/default/files/inline-files/Briefing note on execution of wills %28E%26W%29.pdf).

It is possible for an original beneficiary to redirect their interest to another through a deed of variation (DOV). The variation will be treated as though the assets pass to a third party under the deceased's will rather than from the original beneficiary. In such a scenario, the original beneficiary does not make a gift for IHT purposes or a disposal for CGT purposes (unless they chose to do so) and the redirected entitlement will be taxed as part of the estate.

A DOV must:

Alternatively, a beneficiary can execute a deed of disclaimer rejecting their inheritance. Unlike a DOV, the beneficiary is unable to redirect their entitlement and determine who should inherit in their place. For tax purposes, any disclaimer should also be made within two years of the deceased's death.

A foreign will (that is, a will drafted and executed in another jurisdiction) will be recognised in the UK provided it complies with section 1 of the Wills Act 1963. To be valid, the will must conform to the laws of any of the following:

For certain jurisdictions (Northern Ireland, the Republic of Ireland, Australia, Canada or New Zealand), a will that has been correctly executed under English law is normally accepted for probate purposes.

The Wills Act 1963 implements the HCCH Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions 1961 (Hague Testamentary Dispositions Convention).

If the will is deemed invalid, then the deceased is deemed to die intestate for the purposes of any English assets that they own.

The UK opted out of the Succession Regulation ((EU) 650/2012) in 2015 and following its exit from the EU can no longer opt in. In the context of a foreign will, the Hague Testamentary Dispositions Convention takes priority over the Succession Regulation with regard to the formal validity of a will, where the applicable jurisdictions are signatories of both treaties. If this is not the case, the Succession Regulation will apply and its rules are consistent with those of the Wills Act 1963.

Where a non-domiciled individual dies with assets based in England and Wales, such assets can only be administered where there is either:

There are statutory rules which determine who can apply for the Grant (Rule 30, Non-Contentious Probate Rules). The process for obtaining an English grant or resealing the foreign grant depends on the following:

For succession purposes, assets held in certain civil jurisdictions may vest in the beneficiaries, leading to jurisdictional disputes with UK-resident PRs (that is, the persons administering the estate (see Question 22)).

It may also be difficult to collect in, value foreign assets and pay any IHT, particularly if there are issues with regard to the payment of the estate's liabilities.

The PRs are responsible for administering an estate and the assets vest in them.

There are two types of PRs:

There is no requirement for a beneficiary to be appointed as an executor and there is no forced heirship regime.Therefore, the testator is free to choose who is appointed. There is no limit to the number of executors that can be appointed in a will, but probate will not be granted to more than four (section114(1), Senior Courts Act 1981).

Two or more executors should be considered on certain occasions to manage the assets of the estate (for example, where a sale of property may occur).

The PRs are responsible for:

PRs have various fiduciary and statutory duties and powers and they must administer the estate in accordance with these responsibilities. These powers can be amended by the terms of the will.

Administrators must also administer the estate in accordance with the intestacy rules (for example, legislation dictates how funds must be distributed to beneficiaries).

The PRs are responsible for administering an estate and the assets vest in them.

To establish title and gather in assets, key steps the PRs need to undertake are:

The grant is necesary to access assets and should be submitted to third parties (such as individuals or financial institutions) as required. It may be difficult to deal with assets until this is done. Certain low value assets may be released without a grant.

In relation to non-resident executors, many institutions require "wet signatures" on their forms (that is, signed in person by hand). Non-resident executors should be informed about this requirement in good time to prevent unnecessary delay and to ensure that the documents are sent securely overseas.

Valuation can be carried out as either:

HMRC refer valuations to the office of the District Valuer. If a red book valuation is obtained and HMRC raises queries in respect of the valuation, the chartered surveyor will be contacted to defend the valuation they provided as part of the service the PRs have paid for.

Before making a payment of inheritance tax, the PRs must obtain an IHT reference number from HMRC. Two forms can be submitted to HMRC, which are either:

The form submitted will ultimately depend on the value of the estate and other information particular to it. For details of the timings for these payments, see Question 1.

PRs are responsible for distributing the deceased's assets to the correct beneficiary and if they fail to do so may be personally responsible for any losses.

PRs are not bound to distribute the estate before one year after death (section 44, AEA 1925) but can do so if appropriate.

Issues to be considered prior to distribution include:

If the deceased was domiciled in England and Wales at the date of death, all their worldwide assets and liabilities will be subject to IHT and must be valued. For details of the payment schedules, see Question 1.

If the estate involves foreign elements, any valuations carried out should be obtained in the relevant foreign currency (as at the date of death). The exchange rate at the date of death must also be ascertained, to convert the value into GBP. IHT must then be paid on the deceased's worldwide assets. The relevant valuations must be disclosed on the applicable IHT forms.

In the event that IHT has been overpaid, the PRs must claim this back within four years of making payment (section 241, IHTA).

A beneficiary can challenge the validity of a will. The main grounds are:

A claim cannot be brought against an executor simply because they are named as executor in a will. A claim can be brought once the grant has been obtained, or once the relevant person has elected to act as executor/administrator (although in some cases it may be possible for the exectuor to be sued before the grant has been issued).

Beneficiaries can bring a claim against PRs if they have breached their fiduciary duty or acted negliently.

Testators have testamentary freedom to dispose of their property as they wish. However, certain categories of person are entitled to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (IPFDA 1975) if they can demonstrate that either:

Persons who can bring a claim under the IPFDA 1975 include a:

The deceased must be domiciled in England and Wales for a claim to be brought.

Strict time limits apply within which a claim must be brought, otherwise the court's permission is required.

It is possible for testators to leave a letter of wishes, setting out the reasons why no, or limited, financial provision was made to a particular person. While the court may give evidential weight to this, it does not exclude the court's jurisdiction under the IPFDA 1975.

The testator enjoys testamentary freedom, with no forced heirship regime in place.

Family members of the deceased do not enjoy automatic rights to inherit under their estate. If the deceased dies domiciled in England and Wales, however, certain individuals can bring a claim under the IPFDA 1975 (see Question 25).

Not applicable (see Question 26).

English rules of private international law determine the law for succession purposes:

The UK is not a signatory to the Succession Regulation. However, English courts may still be influenced by its application when determining succession issues (for example, where a UK-domiciled individual owns property abroad in a signatory country). For details of the application of the Succession Regulation after Brexit, see Question 20.

The doctrine of renvoi (sent back) is accepted by the courts and there are two possible options:

The succession rules are principally set out in Part 4 of the AEA 1925. The order of entitlement under the intestacy rules depends on:

The general principle is that the estate is shared by the relatives in the highest category to the exclusion of relatives in lower categories (section 46, AEA 1925).

Distribution of the estate depends on whether death occurs before or after 1 October 2014.

For deaths occurring after 1 October 2014, distribution is as follows:

The IPFDA 1975 applies to intestacy situations. A relevant applicant must apply on the basis that the intestacy rules have failed to make reasonable provision for them (see Question 25).

Types of trust. Trusts are recognised in England and Wales. A trust can be created expressly, by operation of law or through statute (for example, under intestacy or via bankruptcy proceedings).

In the case of an express trust, the trust document must be completed and assets transferred to the trustees to create the trust. To be valid, the settlor's intention to create the trust must be established and its assets and beneficiaries clearly defined. Trusts can be created either during lifetime (by those over 18 years) or on death in a will.

The main types of trust include:

Residence of trusts. A trust is not a separate legal entity and liability for tax will therefore fall on the settlor, trustees or the beneficiaries. A trust's taxation will depend upon whether the trust is treated as a UK resident or an offshore trust. This can be determined by:

Trusts are recognised under UK tax laws. The tax treatment of trusts under UK tax laws are set out as follows.

IHT. IHT tax treatment will depend on a number of factors including (among other things):

Relevant property trusts. Trusts taxed under this IHT regime include:

IHT charges apply as follows, after the application of any available NRB:

Certain trusts, such as bereaved minor trusts and trusts for persons aged 18 to 25 created in a will have limited or reduced exposure to IHT, but their taxation is based on the principles of the relevant property regime.

Qualifying interest in possession trusts (QIIPs). These are treated differently for IHT purposed to RPTs. Examples of these trusts include:

For QIIPs, there are no IHT charges during the beneficiary's lifetime, but they are deemed to own the trust's assets on their death which will form part of their estate for the IHT calculation.

Income tax. Income tax is generally charged on income arising from the trust's assets. For UK trusts, income tax is charged on worldwide income. The tax rate applied is determined by the type of trust:

CGT. CGT is charged on disposals of UK trust assets by the trustees, or on the transfer of assets to or out of a trust. Trustees are generally subject to CGT at the rate of 20% or 28% (for the disposal of certain residential property where no reliefs are available). Trustees can normally claim half of the annual tax-free allowance that is available for individuals.

SDLT. Trustees can be subject to the 3% supplemental charge for SDLT purposes on purchases of additional residential property.

The UK now maintains a central register of trusts. The Trust Registration Service (TRS) was introduced in June 2017 following publication of the Money-Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations SI 2017/692 (MLR 2017).

MLR 2017 implements the Fourth EU Anti-Money Laundering Directive ((EU) 2015/849) in the UK. The MLR 2017 introduced two key requirements:

The Fifth Anti-Money Laundering Directive ((EU) 2018/843) significantly extended the type of trust which needs to register on the TRS. The MLR 2017 has therefore been amended to reflect this and now includes updated TRS registration requirements.

However, access to the TRS and its data is restricted and is not available to the public. Information can only be accessed in one of the following circumstances:

Details of the types of trusts required to register and the types of trust exempt from registration are beyond the scope of this Q&A. However, for further details see Practice Note, Trusts Register and Information Obligations for Trustees: Trusts that do not have to register.

The government has also recently established a new Register of Overseas Entities (ROE), which establishes a publicly accessible register detailing the beneficial ownership of all overseas entities who own UK property. Details of the rules relating to beneficial ownership and the information trusts may be required to disclose are beyond the scope of this Q&A. However, for further details see Practice Note: Register of Overseas Entities: Overview.

The Recognition of Trusts Act 1987 addresses private international law issues connected with trusts. It allows the courts to determine the governing law applicable to a trust and deals with key issues related to the recognition of a trust. The Act incorporates the HCCH Convention on the Law Applicable to Trusts and on their Recognition 1985 (Hague Trusts Convention).

The current residence of individual trustees will determine the residence, and therefore the tax position, of the trust for income tax and CGT purposes. For example, the following rules will apply:

Exit charges for CGT purposes should be considered before the emigration of any trust (section 80, Taxation of Chargeable Gains Act 1992).

Purpose trusts are invalid unless charitable in nature or they fall within a narrow list of exemptions. This is because such trusts have no beneficiaries to enforce their terms.

Examples of exemptions where a purpose trust is valid include:

The Perpetuities and Accumulations Act 2009 (PAA 2009) came into force on 6 April 2010 and applies to all trusts in England and Wales created after this date, whether in writing or orally. It provides for:

Trustees have a fiduciary obligation to keep beneficiaries informed and provide accounts in relation to a trust. Beneficiaries have a right to request other trust documents but no entitlement as of right to see the document.

Disclosure is at the discretion of the trustees. This will be determined by a number of factors including:

Trustees may agree to release "core" trust documents, such as the trust deed or accounts, but will be more reluctant or may refuse to release documents which are confidential, relate to the exercise of their powers or pertain to legal professional privilege (Schmidt v Rosewood Trust Ltd (Isle of Man) [2003] UKPC 26).

Beneficiaries have also recently attempted to access trust information through the alternative route of a subject access request utilising data protection legislation (Dawson-Damer v Taylor Wessing LLP [2020] EWCA Civ 352 (11 March 2020)).

The Family Court will consider the financial resources of each divorcing party and has wide powers to make orders transferring property to which one spouse/civil partner is entitled, to the other spouse/civil partner.

In assessing the financial resources of one party to a divorce, the Court can include trust assets as assets available to that party, and take this into account in the division of financial resources between the parties (in such cases, orders can be made against the party benefitting from the trust's assets on the expectation that those benefits will continue following the divorce).

In addition, if a trust is considered to be a nuptial trust, the Family Court can make variations to the terms of the trust in the division of financial resources between the parties. Generally, a trust is considered "nuptial" if made for the benefit of one or both of the parties or their children, created because of the marriage, or referring to the marriage, whether made before the marriage or after it. The Family Court will consider a wide range of factors to determine if a trust is a nuptial trust, including whether the trust's assets have been used to benefit the marriage/civil partnership. If this is found to be the case, the Court has an unlimited and unfettered discretion to vary its terms.

Enforcement of Family Court Orders can be difficult where the trust is governed by a foreign jurisdiction and or where there are no trust assets in England or Wales.

An individual's ability to use a trust to shelter assets from their creditors is restricted (Insolvency Act 1986). Claims can be made where assets are moved to defraud creditors (for example in anticipation of bankruptcy) or placed in a trust at an undervalue. In such circumstances the gift can be set aside (section 339, Insolvency Act 1986).

The treatment of a bankrupt beneficiary differs according to the type of trust and their beneficial interest, for example:

A trust can be used to protect vulnerable beneficiaries by converting the life interest to a discretionary one upon bankruptcy (a protective trust).

Charities are recognised in England and Wales. A charity will be legally recognised if validly constituted and created in accordance with the Charity Act 2011.

To be validly recognised, the charity must be:

See also Country Q&A: Charitable Organisations in the UK (England and Wales): Overview.

A charity must only have charitable purposes, which are applied for the benefit of the public. A charitable purpose must fall within one of 13 categories defined under the Charity Act 2011. These include:

Public benefit is not defined in the Charity Act 2011. The public benefit must be proven, as it is not automatically presumed that the charity has a charitable purpose. To prove a public benefit, a charity must show that both:

The four main legal structures, which can be used to create a charity are:

From 2018, it has been possible for existing charitable companies to convert to a CIO.

The choice of legal structure will be influenced by (among other things):

To set up a charity, the founders will need to:

The Charity Commission is both the registrar and regulator for charities in England and Wales. It is an independent non-ministerial government department with quasi-judicial powers. The Charity Commission is responsible for:

The Charity Commission is a civil regulator and its remit does not extend to investigating criminal or taxation matters.

A charity must apply to be registered online if either:

Specified information must be provided to the Charity Commission to register, which includes:

The Charity Commission has various powers to monitor a charity and its adherence to legislative requirements. Its investigative powers under section 46 of the Charity Act 2011 allow it to review any apparent misconduct and mismanagement in the administration of charities. Its regulatory powers are wide-ranking: charities may be subject to criminal convictions (particularly following a section 46 investigation), may be issued guidance, or may be ordered to remove any of the charity's trustees.

Excepted charities are not required to register with the Charity Commission due to certain statutory requirements and their income thresholds.

Exempt charities are not regulated by the Charity Commission but rather by the government or other UK authorities. They include museums, universities and other bodies all of which have charitable purposes.

Exempt and excepted charities are not required to register but retain charitable status.

A charity is not entirely exempt from tax. However, if the charity complies with its statutory definition for tax purposes and is recognised by HMRC, it can benefit from multiple tax reliefs. These include:

There are also additional non-fiscal benefits to creating a charity, which include:

There are several disadvantages to consider when setting up a charitable organisation:

There are various benefits to individual donors when making charitable donations. In relation to tax, the following benefits are possible:

A charitable donation also allows the donor directly to choose those charities they wish to support or establish their own charitable vehicle if needed.

Co-ownership occurs where two or more individuals own a simultaneous interest in assets and determines its legal and beneficial structure. There are two types of co-ownership:

Each joint owner owns the whole property (there are no distinct, separate shares). For a joint tenancy to exist, four conditions (or unities) must be met:

With this structure, the share of the asset passes by survivorship on death (that is, it passes automatically to the other joint owner(s)). A joint beneficial interest can also be severed, which creates a tenancy in common.

With this structure, each co-owner holds a specific, undivided share (for example, a one-third share). Each co-owner must have equal rights to possess or occupy the entire property (as with a joint tenancy). The share passes in accordance with a will or, if there is no will, under the intestacy rules.

The application of co-ownership rules is determined by the type of asset under consideration.

Land. Co-owners hold the legal estate in property on a trust of land (section 1, Trusts of Land and Appointment of Trustees Act 1996 (TLATA)).

The legal estate is held as joint tenants: each co-owner owns the whole legal asset rather than a distinct fractional share (section 36), Law of Property Act 1925 (LPA).)

Beneficial co-owners can hold the equitable estate to a property either as joint tenants (section 36(1), LPA) or as tenants in common (section 34, LPA).

A declaration of trust should be executed to identify the beneficial ownership and its shares, in order to clarify ownership and avoid future disputes as to ownership either during lifetime or on death.

Personal assets. Types of moveable assets which can be subject to co-ownership include:

Assets can be held either as joint tenants or tenants in common often on bare trust for the owners.

In relation to income tax and CGT, each co-owner is assessed to tax on any income or gain attributed to their share, irrespective of whether they are joint tenants or tenants in common.

The deceased's co-owned share (dependent on reliefs/exemptions) is subject to IHT and treated as part of their estate for IHT purposes. To allow for the difficulty in selling a share of an asset in property, its value may be subject to a discount on death.

England and Wales do not have a community of property or other statutory matrimonial regime. The Family Court has a wide range of powers to make orders for the division of property on divorce or dissolution of a civil partnership.

Cohabitees do not have the same legal rights as married couples or civil partners. Unless a property is in a joint name, a cohabitee has no guaranteed rights to ownership upon separation. However, it is possible for cohabitees who are not the legal owners of property to acquire a beneficial interest through their contributions to the property (for example, in relation to the purchase price or the mortgage payments).

If a cohabiting partner dies without leaving a will, the surviving partner will not automatically inherit any of the deceased's estate (unless it is in a joint name).

The Civil Partnership Act 2004 (CPA 2004) permits same-sex couples to enter into a civil partnership. A civil partnership provides same-sex couples with similar rights and obligations under UK tax and succession laws as opposite-sex married couples.

In addition, the Marriage (Same Sex Couples) Act 2013 (MSSCA 2013) permits both:

Same-sex married couples enjoy similar rights and obligations under UK tax and succession laws as opposite-sex married couples.

Opposite-sex couples can now also enter into civil partnerships under the Civil Partnership (Opposite-Sex Couples) Regulations 2019 (SI 2019/1458). However, opposite-sex civil partnerships cannot currently be converted into marriages.

The Marriage Act 1949 and the Marriage Act 1994 contain the key statutory requirements with regard to a marriage. In addition, there is numerous case law on what constitutes a valid marriage, where it is typically described as a "contract, formally entered into" (Park v Park [1953] 2 All ER 1411).

The MSSCA 2013 expands the definition of marriage to include a legally recognised contract between a man and a woman or two persons of the same sex.

For there to be a valid marriage, a couple must:

From 27 February 2023, the age at which an individual can legally marry or enter into a civil partnership increases to 18 years (Marriage and Civil Partnership (Minimum Age) Act 2022).

Divorce is the legal end to a marriage. The Divorce, Dissolution and Separation Act 2020 (DDSA 2020), which came into force on the 6 April 2020, significantly changed the grounds and process for a divorce.

Divorces in the UK are now determined according to whether:

For proceedings commenced before 6 April 2020, the position remains unchanged: the DDSA 2020 does not apply retrospectively to these applications. England and Wales was a fault-based jurisdiction for divorces. To obtain a divorce, the spouses must have been married for at least 12 months.

There is only one ground for divorce the irretrievable breakdown of the marriage (section 1 of the Matrimonial Causes Act 1973 (MCA 1973)). This must be established by one of the five facts in section 1(2) MCA 1973, which are:

The DDSA 2020 retained the sole ground of divorce as irretrievable breakdown of the marriage, but removed the requirement to evidence it with one of the five "facts" listed above.

A divorce is obtained by filing a petition with the Court, once the petition has been filed the Court can issue the decree nisi. Six weeks after receiving the decree nisi, one of the parties can request a decree absolute. The marriage is dissolved once the decree absolute has been issued.

Adoption is the legal process by which individuals become a child's parents, assuming full legal and parental responsibility for the child by grant of an adoption order from the Family Court.

Upon adoption, an adopted child loses all legal ties with their original parents and the adopters become the child's legal parents with the same rights and responsibilities as if the child was born to them. A child adopted after a parent's death can, in limited circumstances (determined by the nature of their interest), still inherit from their estate under a will or intestacy provisions.

Both birth parents must consent to the adoption unless:

To adopt a child, the adopting parents must be over the age of 21 years and legally resident in the UK and have been so for at least 12 months. To be adopted, a child must:

A child is legitimate if their parents are married at the time of their conception or birth.

A legal status acquired by couples who register as civil partners of each other under the CPA 2004, providing them with similar legal rights to married couples.

See also Question 47.

A person is a minor until they attain 18 years (section 1, Family Law Reform Act 1969).

A legal estate in land cannot be vested in a minor (section 1(6), LPA).

An individual must be at least 18 years to execute a will unless they have privileged status (for example, where they are in the military and on active service or at sea) (section 11, WA 1837) when they can be under 18 years.

Where a minor inherits under an intestacy, the inheritance will be contingent upon the minor attaining 18 years or marrying at an earlier age with the requisite consent (although see Question 48 concerning consent and marrying age).

Where a minor receives an absolute gift, the assets are held on a bare trust and the tax rules are as follows:

The Mental Capacity Act 2005 (MCA 2005) and the Mental Capacity Code of Practice (Code) set out the test for mental capacity. Decisions must be made in an individual's best interests (section 4, MCA 2005).

Under the MCA 2005, an individual can nominate an attorney to make decisions for them in the event they lose capacity in the future through a:

LPAs replaced EPAs in 2007 (the latter can no longer be created). Existing EPAs made and correctly executed before 1 October 2007 remain valid.

EPAs cover property and financial affairs. They can be used by the attorney at any time with the permission of the person who made them (the donor) provided they are valid.

When the donor starts to lose or has lost their mental capacity, the EPA must be registered with the Office of the Public Guardian (OPG) before it can continue to be used by the attorney.

There are two types of LPAs:

A person can appoint one or more attorneys, one or more replacement attorneys and different people under each type of LPA.

Where more than one attorney or replacement attorney is named, they can be appointed to act on the following basis:

An LPA must be signed by the donor, attorney(s) and replacement attorney(s) and by an independent party (the certificate provider) to confirm the donor understands what they are signing and have not been put under any pressure to sign the LPA.

LPAs are only valid once they have been registered with the OPG. When making their LPA, the donor can choose whether the property and financial LPA can be used while the donor still has capacity (but only with the donor's consent) or only if the donor loses mental capacity. An LPA for health and care can be used only if the donor loses mental capacity.

Any authority given under an "ordinary" power of attorney ends upon the loss of mental capacity.

A deputy can be appointed (by the Court of Protection (CoP)) where there is no valid LPA or EPA. An Independent Mental Capacity Advocate (IMCA) can be involved to support a person who lacks capacity and does not have anyone else to speak for them.

The UK is signatory to HCCH Convention on the International Protection of Adults 2000 (Convention), but has not ratified its content.

Powers conferred under the MCA 2005 must be interpreted consistently with the Convention.

There are, however, some substantive differences between the MCA 2005 and the Convention and this has the potential for several areas of difficulty. The holder of a foreign power of attorney should consider doing following in relation to their application, to ensure they have sufficient management powers:

In its 2022 Autumn statement, the government announced that several tax thresholds would be frozen or changed for the 2023-24 tax year.

The results of several consultations are also awaited including one on corporate re-domiciliation, which allows foreign-incorporated companies to change their place of incorporation to the UK (inward re-domiciliation), and to permit outward re-domiciliation.

Attention continues to focus on the ownership of UK property by overseas entities following the ongoing implementation of the ROE. The Economic Crime and Corporate Transparency Bill is expected to come into force in 2023 and introduce further amendments to the ROE (see Question 33).

The Powers of Attorney Bill 2022-23 may also modernise and introduce changes to the process and production of LPAs.