Brexit has far-reaching impact on European politics and economy. The United Kingdom’s decision to leave the European Union has not only political consequences, but also tax consequences. One of the tax areas affected by the Brexit is inheritance and gift tax.
Prior to Brexit, U.K. tax law was regulated at the European level, making it possible for EU citizens to transfer their assets tax-free to their descendants or other beneficiaries in other EU countries. As a result of the UK’s withdrawal from the EU, these regulations have changed. British nationals now face higher taxes on inheritances and gifts within the EU, causing uncertainty for those affected.
Especially for German citizens who have a residence or assets in the UK or have inherited from British citizens, the change in tax legislation is of great importance. As a result, there may be changes in estate and wealth plans to minimize the cost of inheritance and gift taxes.
Brexit therefore also has significant implications for inheritance and gift tax. It is important for those affected to familiarize themselves with the new rules and, if necessary, adjust their estate and wealth structure plans to minimize tax burdens.
What is Brexit?
Brexit is a referendum in which the British people decided to leave the European Union in June 2016. This historic event has not only political implications for the UK’s relationship with the EU, but also economic and tax consequences.
Inheritance and gift tax is an important source of income for the state budget. In the UK, this tax is seen by many as unfair and there are discussions to abolish or modify it. Leaving the EU could radically change the UK tax system, and it is unclear what impact this will have on inheritance and gift taxes.
There are also concerns about the impact of Brexit on cross-border tax planning. While the UK was a member of the EU, there were many agreements in place to avoid double taxation, which now need to be renegotiated. Companies operating in both jurisdictions will face a complex tax situation once the UK has left the EU.
- Inheritance and gift tax is a major issue in UK politics
- Leaving the EU could radically change the UK tax system
- Agreements to avoid double taxation will need to be renegotiated
Overall, there are many questions and uncertainties regarding the tax implications of Brexit. It remains to be seen how the political and economic situation will develop and what changes this will have on the UK tax system.
Inheritance tax and gift tax in Germany
In Germany, inheritance tax and gift tax are an important source of revenue for the state. Brexit could change legislation for foreigners who inherit in Germany or receive gifts in this country.
Currently there are no differences in inheritance and gift tax for German and EU citizens. However, there are differences for non-EU citizens. An exemption amount of 2.000 for inheritance tax, while for EU citizens an allowance of 500.000 Euro applies. For gift tax, non-EU citizens have an allowance of 10.300 euros, for EU citizens an allowance of 400.000 euros.
How Brexit will affect inheritance and gift tax in Germany is currently unclear. It is conceivable that there will be changes in legislation, particularly for non-EU citizens. It remains to be seen what impact Brexit will have on tax practice in Germany.
- Inheritance tax allowance for EU citizens: 500.000 euros
- Inheritance tax allowance for non-EU citizens: 2.000 euros
- Gift tax allowance for EU citizens: 400.000 Euro
- Gift tax allowance for non-EU citizens: 10.300 euros
Inheritance tax and gift tax in the UK after Brexit
Inheritance and gift tax in the UK is expected to be affected by Brexit. The country will be freer to design its own tax laws after leaving the EU.
Nevertheless, it is important to note that inheritance and gift tax in the UK will by no means be abolished. The country relies on such tax revenues and a tax system similar to the current one will be maintained.
It remains to be seen what changes will be made to inheritance and gift tax in the UK in the medium and long term and how these will affect taxpayers.
- However, it is likely that the UK will increasingly rely on tax havens to attract wealthy individuals in the future.
- It is also possible that new agreements will be concluded between the UK and third countries as a result of Brexit, which could have an impact on inheritance and gift tax.
The exact effects, however, remain to be seen. It is advisable to seek advice from experts and keep abreast of the latest developments.
How will the Brexit affect inheritance and gift taxes?
The United Kingdom’s exit from the European Union raises many questions, not least in relation to inheritance and gift tax. Until now, citizens of the United Kingdom have been able to transfer their assets within the EU quite easily without having to pay high taxes. However, with the Brexit, this changes fundamentally.
As of 1. January 2021, the new tax treaty between the European Union and the United Kingdom will come into force. This means that inheritances and gifts between the UK and EU countries are now subject to national tax laws. This can be very costly for heirs and donors, as tax rates can vary widely in different countries.
In addition, British citizens who have assets in EU countries should prepare for some changes. This is because these assets may now be considered “non-UK resident” and taxed accordingly. Special attention must be paid to the individual tax laws of the respective countries.
All in all, Brexit is a big change for inheritance and gift tax in Europe. It is strongly advisable to find out about the new rules early and, if necessary, seek advice from a tax expert.