How to talk to pension non-believers

[RetireJapan]

I think there are many possible reasons why people don’t “invest”.

Regarding voluntary NI contributions in the UK, I don’t pay them because I think the UK government would tax at 40% the inheritance my Japanese wife would receive (given I’m likely to die before her).

In short, any assets in my name worldwide, including property, exceeding the nil rate band (325,000 pounds?), would be taxed at 40%, because the assets are passing from a UK domiciled person to a non-UK domiciled person.

Domicile = domicile for tax purposes, nothing to do with where you live. If born British, then UK IR treat you as UK domiciled, unless you can prove you have effectively cut links with the UK.

* I think paying into and claiming a UK government pension is quite a strong link. *

Years ago, I sought legal advice and had a document drawn up effectively renouncing UK domicile, ashes to be scattered in Japan, etc.

I am NOT an expert, don’t understand half the stuff on this forum, and may be completely wrong. But I guess that many readers are not aware of this potential trap of paying NI contributions. Of course, if you die in Japan, your spouse/partner inherits, and the UK never knows about it, then …

Reference:
https://assets.publishing.service.gov.u ... uk.pdf.pdf

https://taxscape.deloitte.com/article/i ... ouses.aspx

That is a really interesting point, but I don't think paying into the UK state pension from abroad, or receiving a pension while abroad will affect your UK domicile. Both of those are separate categories defined by HMRC, and by definition mean that you are not living in the UK.

This article suggests being tax domiciled in the UK for 15 years as a benchmark: https://www.burges-salmon.com/news-and- ... -it-matter

[Deep Blue]

Yes, unfortunatley that wiki doesn't answer a single one of my questions!

Seeking advice from a qualified tax professional would seem to be the wisest course of action to take when transnational inheritance is involved.

This is what I have done, and given up halfway through the process each time because it is just too difficult to arrange tax affairs optimally when it is not known where we will end up dying.

[RetireJapan]

Yes, unfortunatley that wiki doesn't answer a single one of my questions!

Seeking advice from a qualified tax professional would seem to be the wisest course of action to take when transnational inheritance is involved.

This is what I have done, and given up halfway through the process each time because it is just too difficult to arrange tax affairs optimally when it is not known where we will end up dying.

Haven't read it in detail, but the Japan UK tax treaty says it is designed for "the avoidance of double taxation": https://www.mof.go.jp/tax_policy/summar ... 0202a2.pdf

In my opinion it is not worth stressing about this kind of thing unless we are talking serious money (ie 100s of millions of yen). If the estate is likely to be less than that things will probably be okay regardless of how much tinkering we do for tax optimization.

If your estate is substantial, probably worth paying for advice though.

[Roger Van Zant]

I think there are many possible reasons why people don’t “invest”.

Regarding voluntary NI contributions in the UK, I don’t pay them because I think the UK government would tax at 40% the inheritance my Japanese wife would receive (given I’m likely to die before her).

In short, any assets in my name worldwide, including property, exceeding the nil rate band (325,000 pounds?), would be taxed at 40%, because the assets are passing from a UK domiciled person to a non-UK domiciled person.

Domicile = domicile for tax purposes, nothing to do with where you live. If born British, then UK IR treat you as UK domiciled, unless you can prove you have effectively cut links with the UK.

* I think paying into and claiming a UK government pension is quite a strong link. *

Years ago, I sought legal advice and had a document drawn up effectively renouncing UK domicile, ashes to be scattered in Japan, etc.

I am NOT an expert, don’t understand half the stuff on this forum, and may be completely wrong. But I guess that many readers are not aware of this potential trap of paying NI contributions. Of course, if you die in Japan, your spouse/partner inherits, and the UK never knows about it, then …

Reference:
https://assets.publishing.service.gov.u ... uk.pdf.pdf

https://taxscape.deloitte.com/article/i ... ouses.aspx

Domicile = domicile for tax purposes, nothing to do with where you live. If born British, then UK IR treat you as UK domiciled, unless you can prove you have effectively cut links with the UK.

I don't think this is correct. If you are living in Japan and paying taxes in Japan, you are not UK-domiciled.

[Deep Blue]

I don't think this is correct. If you are living in Japan and paying taxes in Japan, you are not UK-domiciled.

No, the OP is correct. Domicile is usually where you are born. You are confusing it with residence, which is a common mistake.

[Deep Blue]

In my opinion it is not worth stressing about this kind of thing unless we are talking serious money (ie 100s of millions of yen). If the estate is likely to be less than that things will probably be okay regardless of how much tinkering we do for tax optimization.

If your estate is substantial, probably worth paying for advice though.

Yes, if it was just a few tens of millions of yens worth of IHT I think we'd just accept it and put it down as another cost to pay for the comforts of living in Japan. But I don't want my wife to be saddled with a monstrous tax bill, and nor do I fancy making a big donation to the Japanese government when I die, instead of living it to my wife and children. So for us it is a nesseccary evil, but one I keep putting off and off and off...

[RetireJapan]

Yes, if it was just a few tens of millions of yens worth of IHT I think we'd just accept it and put it down as another cost to pay for the comforts of living in Japan. But I don't want my wife to be saddled with a monstrous tax bill, and nor do I fancy making a big donation to the Japanese government when I die, instead of living it to my wife and children. So for us it is a nesseccary evil, but one I keep putting off and off and off...

One thing I am planning once we reach escape velocity (net worth growing by far more than we need annually on a regular basis) is to give money up to the gift limit to kids and grandkids every year. This way they will get it when they need it, not when I die when they probably don't need it any more, and this will also reduce our estate etc. etc.

[Deep Blue]

Yes, this is a good option. I don't really trust them to not blow it when they turn 18/21 and can access the money themselves, but I think this is just a chance we have to take.

[RetireJapan]

Yes, this is a good option. I don't really trust them to not blow it when they turn 18/21 and can access the money themselves, but I think this is just a chance we have to take.

You can put conditions on it like maxing out iDeCo etc

[Deep Blue]

Sorry, not sure what you mean - conditions on them?