Luxembourg Life Insurance: A New Haven Amidst UK Tax Reforms
The British tax landscape is undergoing significant changes, and these shifts are making Luxembourg life insurance policies an even more appealing option for many individuals. The upcoming alterations to the tax system, particularly those affecting “Non-Domiciled” (Non-Dom) individuals, have financial advisors and investors alike reassessing their strategies.
François-Xavier Jeanmart explains how the end of advantageous tax statuses in the UK is affecting the demand for Luxembourg life insurance policies.
The Demise of the Non-Dom Regime
The UK government is preparing to abolish the favorable tax treatment of Non-Doms. Announced last September by the Labour government, this policy will take effect on April 6, 2025. The current “Non-Dom” regime is being replaced by a new system called “FIG” (Foreign Income and Gains).
The FIG regime will allow foreign income and gains to remain tax-exempt for a limited period of four years, provided that the individual has not been a UK tax resident for the ten years preceding this period. Those already residing in the UK can also benefit from the FIG exemption, but only within the four-year residency window.
Compensatory Tax Measures and Inheritance Tax
The UK government is also introducing tax measures to mitigate the effects of the Non-Dom regime’s end. A residence-based inheritance tax regime will be implemented on April 6. Assets held outside the UK will be subject to inheritance tax after residing in the UK for 10 out of the last 20 years. Furthermore, individuals leaving the UK after a decade of residence will remain subject to UK inheritance tax for an additional “tax tail” period, which can extend up to a decade, depending on the length of their UK residency.
Luxembourg Life Insurance as a Viable Alternative
With the Non-Dom regime’s scheduled end, Luxembourg life insurance policies are emerging as a primary alternative. These policies offer a long-term solution, especially when compared to shorter-term strategies, such as the four-year FIG regime.
Luxembourg’s regulations facilitate premium payments through contributions in kind. This structure provides customers with a way to avoid asset disinvestment. For example, Non-Doms looking to manage unrealized capital gains before April 6, 2025, can choose to fund a Luxembourg life insurance policy by transferring an existing portfolio. Moreover, these policies allow individuals to sustain their lifestyle abroad, thanks to a favorable regime for partial surrenders, capped at 5% of the premiums paid annually.
For those holding “Excluded Property Trusts” to lessen UK inheritance tax, the use of a Luxembourg life insurance policy by the trustee could prevent immediate taxation of income and capital gains on the assets held within the trust.
Cardif Lux Vie’s Solutions for UK Residents
Reuben Everett discusses the advantages and services provided by Cardif Lux Vie to UK-resident customers.
So, what can Cardif Lux Vie offer UK-resident customers in practical terms? Reuben Everett emphasizes that the strength of Luxembourg life insurance lies in its ability to meet various needs in a single arrangement. For high-net-worth clients operating internationally, financial management, taxation, portability, inheritance, and protection are key considerations.
Cardif Lux Vie builds “made-to-measure” solutions customized to unique client groups. With multilingual, multidisciplinary teams, they offer expertise in areas like legal matters, wealth engineering, financial engineering, and asset management.
For UK residents, Cardif Lux Vie works closely with teams within banks and financial institutions, providing dedicated solutions. These include various investment vehicles (including sophisticated assets), a capitalisation envelope, and tax exemptions. Benefits of such tools can encompass access to up to 5% of the initial premium without tax implications each year. Other tools include segmentation, estate planning and gift with control, pledging, and more.
Furthermore, Luxembourg life insurance provides portability. If Non-Doms leave the UK, they will retain access to a capitalisation solution that is passportable to countries across Europe and even in non-EEA countries.
Cardif Lux Vie offers an extensive range of products, with compliant policies available in 6 European Union countries (France, Luxembourg, Belgium, Italy, Spain and Portugal) and 10 non-EEA countries (China, United Kingdom, Hong Kong, Mauritius, Israel, Mexico, Monaco, San Barthelemy, San Marino and Singapore).
Cardif Lux Vie’s Differentiating Factors
What makes Cardif Lux Vie different in this landscape? Reuben Everett believes the strength of its business model is paramount, built on a large, solid group with a high-quality shareholder base. Its ability to respond to diverse situations is also a key factor, offering products and services in over fifteen countries while drawing on tax, legal, and wealth management expertise.
Cardif Lux Vie’s focus is on supporting and being available to partners. This commitment to partnership guides its strategic choices and priorities.
