IHTM47037 - Long-term UK residence: Spousal long-term UK residence elections 鈥� the date the election takes effect
Both a lifetime and a death election (IHTM47032)听尘耻蝉迟 contain听the date from which the election is to take effect, IHTA84/S267ZD(2).听
That date must be:听
after 5听April 2025, IHTA84/S267ZD(2)(a), and听
be within a period of:听
in the case of a lifetime election, seven years of the date of the election, IHTA84/S267ZD(2)(b)(i),听
in the case of a death election, seven years of the deceased鈥檚 death, IHTA84/S267ZD(2)(b)(ii).听
In addition, IHTA84/S267ZD(3) says that at the date on which the election is to take effect, the person making the election must have been married to, or in a civil partnership, with a person who was a long-term UK resident听(IHTM47000)听at that time. Note that there is no requirement for that person to be a long-term UK resident听throughout the period from听which听the date the election takes effect until the date the election is made. The person making the election does not need to be married or in a civil partnership when the election is made (IHTM47032).听
A consequence of this is that if a person who is long-term UK resident and does not make an election听and makes听a gift听to their non-long-term UK resident听spouse or civil partner before 6 April 2025听and dies within seven years, the 拢325,000 limit that applies before that date continues to apply (IHTM11033).听
Example听1 (Lifetime)听
In May 2025, Sandra, who was a long-term UK resident听gifts听拢1,000,000 to her civil partner Carol, who was not a long-term UK resident. Of this gift, 拢325,000 is exempt under IHTA84/S18(2), and 拢675,000 is a potentially exempt transfer (PET)听until 7 years have passed from the date of the gift. Sandra听dies in 2027听and the gift听is now a failed PET听(IHTM04057)听and after deduction of the current nil听rate band听(拢325,000), 拢350,000 will be subject to tax听
拢1,000,000 - 拢325,000 = 拢675,000听- 拢325,000听= 拢350,000 x 40%听=拢140,000听
If Carol makes a听valid election to be a long-term UK resident听within 7 years of the date of the gift, the full amount of the gift will be spousal exempt听and the nil听rate band will be available to use against the remainder听of the estate.听听
Example 2 (Death)听
Brian was a long-term UK resident and dies on 15 May 2028.听 He made lifetime gifts of 拢325,000 to his children in the 7 years before his death.听
In Brian鈥檚 Will, he leaves 拢800,000 in cash to his wife Amy who is not a long-term UK resident听at the date of Brian鈥檚 death.听听
On the 12 September 2028, Brian鈥檚 personal representatives make an application for Amy to elect to be treated as a long-term UK resident. The conditions of S267ZC are satisfied and the election is accepted.听
As a result, the 拢800,000 left too听Amy in Brian鈥檚 Will听is fully spousal exempt听and no inheritance tax is payable.听
If the election was not made, then the spousal exemption is restricted to an amount equal to the nil听rate band, currently 拢325,000. In addition, the nil听rate band is available, but in Brian鈥檚 case this is applied in the first instance to lifetime gifts. Therefore, the听remainder听of the legacy to his wife Amy will听then听be subjected to inheritance tax听
拢800,000 - 拢325,000 = 拢475,000 x 40% = 拢190,000听