Double Tax Treaties: What They Are and Why They Matter
Introduction to Double Tax Treaties
Double tax treaties (also known as Double Taxation Agreements/DTAs) are formal arrangements between two countries that aim to prevent individuals and businesses from being taxed twice on the same income. As global mobility and cross-border trade continue to grow, these treaties play an increasingly vital role in simplifying international tax compliance, encouraging foreign investment, and ensuring fair taxation between jurisdictions.
Double tax treaties allocate taxing rights between countries.
For example, a treaty may specify whether income such as dividends, royalties, employment income, pensions, or capital gains should be taxed in the country where the income arises or where the recipient resides, or both, with relief given in the residence country. Treaties often define ‘permanent establishment’ thresholds to determine when a foreign company becomes liable for tax in the other country.
In addition to clarifying who gets to tax what, DTAs provide mechanisms for tax relief. A UK resident earning income in a treaty country might be exempt from tax in the UK on that income or may be eligible to claim a credit for tax paid abroad, depending on the treaty provisions. These agreements typically also include dispute resolution mechanisms and clauses that allow for the exchange of tax information between countries, helping to prevent tax evasion and promote transparency.
The UK currently has over 130 double tax treaties in force, covering most of its major trading partners. These treaties are essential for both expatriates and multinational businesses seeking clarity and consistency in their tax affairs.
UK/India Social Security Agreement
A recent development in international tax cooperation is the UK/India Double Contributions Convention (DCC), which complements the existing tax treaty between the two nations. Signed in 2025 as part of the wider UK/India Free Trade Agreement, the DCC is a social security coordination agreement designed to prevent individuals and their employers from having to contribute to two social security systems at the same time during temporary cross-border assignments.
Under domestic rules, workers posted from the UK to India (and vice versa) could previously become liable for contributions in both countries after the first 52 weeks of their assignment. The DCC aims to eliminate this dual liability for assignments of up to three years.
Once in force, which is expected by mid-2026, the agreement will allow Indian professionals posted to the UK to continue contributing to India’s Employees’ Provident Fund (EPF), provided they obtain a Certificate of Coverage from Indian authorities. In turn, UK-based employees sent to India will remain under the UK’s National Insurance system. After 36 months, local social security obligations resume in the host country from day one.
Importantly, the DCC is limited in scope to contribution liability; it does not affect eligibility for benefits or pension aggregation. It also does not alter immigration or visa rules. However, the financial and administrative relief it offers is significant. For some, the savings on employer contributions could amount to tens of thousands of pounds per employee over the three-year exemption period.
Conclusion
Whether you’re an international assignee, an expat tax advisor, or a business planning overseas expansion, understanding the interaction between double tax treaties and social security agreements like the UK/India DCC is essential.
These instruments reduce complexity and cost, while offering legal clarity for cross-border operations. As more such agreements come into effect, it’s critical to seek up-to-date advice to ensure full compliance and to maximise relief available under treaty provisions. If ETC Tax can help in any way, please get in contact with us.
Why a Divorce Settlement Might Need a Calculator and a Crystal Ball
Getting divorced is, of course, an incredibly stressful time for people.
As well as the obvious emotional turmoil, divorce often involves dividing homes, businesses, pensions, and investments.
The challenge from a tax point of view is that each asset has its own (income and) capital gains tax rules, so that without proper tax advice, what looks like a “fair” 50:50 split can turn into an unbalanced arrangement once HMRC takes its share.
Whilst some cases are more straightforward than others, it’s important for those getting divorced and their professional advisers to recognise those situations which are likely to lead to more tax complexity.
As such, we thought it would be useful to highlight some of the more regular challenges we come across when advising divorcing couples and indeed more generally in relation to capital gains tax advisory work.
Historic improvements, mixed-use properties, or part disposals can require a more “forensic” analysis to get the numbers right.
If the property was acquired in an unusual way, for example, it was inherited or gifted, or previously owned by a company or a trust, this may make things more ‘interesting’ from a tax point of view
What if the property is some development land which is subject to an overage agreement or some contingent consideration? How should that land be valued, and what CGT will apply on the deferred element of consideration?
Businesses Need More Than a Valuation
The value of the business is one thing; the after-tax value is another.
Dividends, director loans, or asset extractions can create extra tax liabilities post-settlement.
Investments Aren’t All Equal
Some assets are easy to split, others come with hidden tax ‘baggage’.
Offshore funds can trigger higher tax rates if they lack “reporting fund” status.
Cryptoassets bring extra complexity, including record-keeping headaches, valuation debates, and questions about the CGT treatment of certain transactions.
Different investment types produce different after-tax incomes. It may be obvious; but £1m in cash is not the same as £1m in a high-yield portfolio or a bond from a tax perspective.
Pensions and Deferred Assets Can Bite Later
Lifetime Allowance charges may still apply in some situations.
QROPS, SIPPs, and overseas schemes have complex rules that can affect both valuation and future tax bills.
The way pensions are divided (offsetting vs sharing) can have radically different tax consequences.
Cross-Border, Residence and Domicile Complications
What if two different countries’ are “fighting” over who gets to tax the gain?
‘Domicile’ status can completely change the inheritance tax and CGT picture.
Offshore trusts and companies need careful unwinding, otherwise, you can accidentally trigger taxes in multiple jurisdictions.
Historic poor management and/or Tax Disputes and Investigations
You may need help identifying and quantifying undeclared or misreported liabilities or matters involving HMRC enquiries.
It might be necessary to reconstruct historic tax positions where records are incomplete or complex.
Conclusion
Divorce is hard enough without a tax bill you didn’t see coming. The earlier a tax specialist is brought in, the more likely the settlement will be truly fair, not just before tax, but after it. If you need help with any aspect of your or your client’s divorce or in relation to capital gains tax advice more generally, please do get in touch.
UK government will change how inheritance tax applies to pensions
From 6 April 2027, the UK government will change how inheritance tax (IHT) applies to pensions. Under the new rules, most unused defined contribution pension funds will be included in a person’s estate on death, making them potentially liable to IHT for the first time.
This marks a major shift in estate planning and will affect thousands of families each year, particularly those with larger pension pots.
Current Position: Pensions and IHT
At present, defined contribution pensions (such as personal pensions and SIPPs) are generally not counted as part of the estate for IHT purposes. If someone dies before age 75, their pension savings can usually be passed to beneficiaries completely tax-free. If they die after 75, the funds remain outside the IHT net, although income tax applies when the beneficiary draws money from the pot.
For many, this has made pensions a highly efficient way to pass on wealth.
What Will Change in 2027?
Starting in April 2027, most unused pension funds will be treated as part of the deceased’s estate. This means that, if the estate exceeds the IHT threshold (currently £325,000 plus any residence allowance), the pension pot may be taxed at up to 40%.
Beneficiaries could still face income tax on any money they withdraw, meaning some inherited pension savings may now be taxed twice… first under IHT, then under income tax rules.
Who Will Be Affected?
This change is likely to affect wealthier households or those who have built up significant pension savings without drawing on them. Government figures suggest more than 10,000 estates each year will now face IHT solely due to pension wealth, with thousands more seeing higher tax bills overall.
Added Complexity for Executors
Under the new rules, responsibility for reporting pensions shifts from pension providers to executors. Personal representatives of the estate will need to locate all relevant pensions, obtain valuations, and report them to HMRC, adding further complexity to an already stressful process.
Penalties may apply if these details aren’t provided within the required time frame, even if the estate isn’t large enough to trigger a tax bill.
Planning Considerations
With the changes now confirmed, individuals should review their estate plans and pension strategies. Some may wish to draw down more of their pension in retirement, rather than leaving it untouched. Others may consider lifetime gifting of other assets, using trusts, or insurance policies to help cover future IHT costs.
It’s also essential to update nomination forms and keep records of all pension schemes to help executors handle future reporting requirements.
In Summary
The government’s decision to include pensions within IHT from April 2027 is a significant development. Pensions will no longer be entirely tax-sheltered at death, and this may affect how people save, spend, and plan for the next generation.
Those with substantial pension savings should act now to ensure they make the most of existing reliefs and avoid surprises later. Professional advice can help identify practical options to reduce potential tax exposure and ease the burden on future beneficiaries.
Next Steps
If you are affected by the new rules or wish to explore your planning options, please contact us at ETC Tax for tailored guidance.
Think of it this way: if you bought something like a second property, some shares, or even cryptocurrency and later sold it for more than you paid, the profit you made (the “gain”) is what HMRC wants to know about, and they want to tax it too.
It doesn’t matter whether you pocketed the cash or reinvested it. If there was a gain, there may be a tax bill, and depending on what you sold, when you sold it, and how much you made, the rules can get tricky fast.
The deadline you really don’t want to miss
If you sell a UK residential property and CGT is due, you have just 60 days from completion to report it and pay up.
If you miss that window, HMRC will start charging late-filing penalties, plus interest.
For other types of gains, like shares or crypto, you’ll usually report them through your Self-Assessment return.
The most common errors we see
You’d be surprised how often people get tripped up. Some think gifting a property to their children means no CGT (not true). Others assume crypto profits are too complicated to track (HMRC disagrees). And many are shocked to learn that just selling a holiday home overseas could trigger a reportable gain, even if they didn’t make that much money from it.
Then there’s the maths. Working out your gain isn’t always as simple as sale price minus purchase price. What about refurbishment costs? Legal fees? Inherited values? Different types of relief? The rules are full of “ifs,” “buts,” and “maybes” and that’s where we come in.
So, how can we help?
In short: we take the stress off you. You tell us what you sold, we look at the numbers, make sure you’re claiming everything you’re entitled to, and file the report accurately and on time.
No panic. No surprises. No “uh-oh” moments further down the line.
Whether you’ve sold a rental property, hit the jackpot on crypto, or you’re just not sure whether CGT applies to your situation we’ll talk it through with you, ,making the complex simple’.
Next Steps
The best time to speak ETC about Capital Gains Tax is before you sell. But if the clock is already ticking on a recent sale, don’t panic, as we can help you get it sorted quickly and correctly. Get in touch and we will help you out!
If your income exceeds £200,000, or your assets total more than £2 million, you’re likely to be on HMRC’s radar.
It’s a position many successful individuals find themselves in, but with that success comes scrutiny.
There’s an entire department within HMRC dedicated to monitoring those ‘high-net-worth’ individuals: the HMRC Wealthy Team
The Role of HMRC Wealthy Team
Their role is to ensure that the UK’s wealthiest taxpayers are fully compliant and to recover any tax that might have been underpaid, whether due to oversight, complexity, or error.
So, while it might feel like your tax return is just another form to complete each year, HMRC may view it as a key piece of a much bigger financial picture.
Wealth Means Complexity, and Complexity Increases Risk
For wealthier individuals, financial affairs often aren’t simple. You may have income from multiple sources – perhaps a business, dividends, interest, rental property, and investments. You might have capital gains to declare or residency issues to navigate. This, and adding offshore interests or cryptoassets into the mix, increases the risk of something slipping through the cracks.
This is why the Wealthy Team exists. Statistically, the more moving parts there are in someone’s finances, the more likely it is that an error or omission will occur. And the more wealth at stake, the higher the tax HMRC stands to gain.
How does HMRC Wealthy Team know?
The Wealthy Team doesn’t work in the dark. They’re equipped with a powerful, AI-driven data system known as Connect. This tool analyses and cross-references vast amounts of information – from bank accounts, credit card activity and Land Registry data to overseas financial details, trust arrangements, and even travel records.
Thanks to international data-sharing agreements, HMRC also has visibility over income and assets held offshore. That includes rental income from overseas property, shares in foreign companies, or funds held in international trusts. Cryptoassets have also become a growing area of focus – and often an area where taxpayer’s misstep.
The point is this: HMRC can see more than ever before, and they’re using that visibility to act with increasing precision.
How do the HMRC Wealthy Team choose who to investigate?
There’s a common misconception that tax enquiries are a roll of the dice, that HMRC sends letters at random. That may have been the case years ago, but today, most enquiries are the result of highly targeted data analysis. If the numbers in your tax return don’t line up with the lifestyle you’re visibly living or the transactions you’re making, this could be a trigger for that brown envelope in the post.
And when an enquiry does land, it’s rarely straightforward. Even a relatively minor technical error can trigger months of back-and-forth with HMRC. According to the National Audit Office, for higher-value cases the average enquiry during 2023-24 lasted around 40 months! That’s more than three years of uncertainty, scrutiny, and stress.
The Most Important Advice? Put yourself in the strongest position from the get-go
Getting your tax return right the first time is the best piece of advice we can give, and engaging with a tax professional for assistance is crucial in ensuring this.
One of the most surprising statistics is that 28% of wealthy individuals are still not represented by a tax agent, so they are managing their affairs without professional support, despite the increasing complexity of today’s tax landscape.
Even among those who do have an adviser, it’s important to recognise that not all accountants and advisers specialise in the nuanced issues that come with significant wealth, such as offshore assets, crypto, or residency matters. In these cases, working with a firm that has specialist experience in your area can make all the difference.
And given the risks involved (including financial penalties, potential reputational damage, and years of investigation), this is one area where we believe expert advice is essential.
How ETC Tax Can Help
At ETC Tax, we specialise in helping high-net-worth individuals manage the compliance burden that comes with significant wealth. We regularly prepare complex tax returns for individuals with high-value or technical affairs, ensure their affairs are accurate, complete and defensible, with professional advice to back it up.
Having your return prepared by a specialist from the outset can be the difference between a quiet year and years of questions from HMRC.
We regularly work with clients who have:
Cryptoassets
Complex UK or international residency positions
Offshore assets or trusts
Property portfolios and capital gains
Multiple income streams and investment structures
If any of that reads true to you, now is the time to make sure everything is in order.
What if I have received an enquiry from HMRC Wealthy Team?
If that brown envelope does land on your doorstep, don’t panic, but do take it seriously.
For individuals with complex financial affairs, HMRC enquiries are not ‘DIY’ jobs. They require a deep understanding of tax legislation, knowledge of how HMRC operates, and the right negotiation strategy to manage the process effectively.
Next Steps
The best way forward? Get professional advice and do it as early as possible. We are happy to help at ETC Tax.
If you’d like to discuss your circumstances or simply ensure you’re in the best possible position before HMRC comes knocking, please do not hesitate to get in touch.
When it comes to planning for the future, one question we hear time and again is:
“Should I put my assets into a trust?”
It’s a great question and a surprisingly common one, especially as families become more aware of inheritance tax (IHT) and the need to protect their wealth for future generations. Trusts have long been a feature of estate planning for the wealthy, but they’re no longer just being used by the ‘super rich’. Today, they’re being used by families of all sizes who want to manage their assets more thoughtfully and more tax-efficiently.
But as with most things in tax, it’s not a simple yes or no.
What exactly is a trust and why do people use them?
Imagine you’ve worked hard to build up a nest egg, perhaps a family home, some savings, maybe a portfolio of investments. Now imagine you want to pass that wealth on, in your own time. While there are many options, a trust can be a popular one.
A trust is like a protective wrapper around your assets which allows you to:
Place specified assets into trust;
Appoint trustees to look after those assets;
Decide who should ultimately benefit from those assets (whether its your children, grandchildren or someone else entirely)
In doing so, it creates a structure which separates beneficial and legal ownership, giving you control over how and when your wealth is passed on.
On top of this, trusts can also help to reduce inheritance tax. For example, certain types of trusts allow you to move assets out of your estate, meaning they’re no longer counted when HMRC calculates the IHT bill on your death. If you survive for seven years after the transfer, those assets may fall completely outside your estate, potentially saving your family thousands (or more) in tax.
Many people also use them to protect young or vulnerable beneficiaries, particularly where an outright inheritance might not be wise. Others use them to keep assets in the family, especially in situations involving divorce, remarriage, or business risk. Some simply want peace of mind, knowing their legacy will be handled responsibly, even after they’re gone.
So, is it the right move?
It depends and this is where things get interesting.
Transferring assets into a trust can be incredibly valuable, but it isn’t always straightforward. For one thing, the transfer itself can come with tax consequences. You might trigger an immediate charge to inheritance tax if you put too much into a trust at once. There may be capital gains tax implications too, if appropriate reliefs aren’t considered.
Additionally, a trust should never be set up for your own benefit, as this can have adverse tax consequences.
Then there’s the trust itself. It’s not a ‘set it up and forget about it’ arrangement. Trustees have legal duties, tax reporting obligations, and the responsibility of managing the trust’s assets in line with your wishes. Certain trusts also face their own ongoing tax regime including charges every ten years, and when assets are taken out.
That’s not to say any of this is a deal-breaker. Far from it. But it does mean you need to go into it with your eyes open, and ideally, with professional guidance.
The right strategy starts with the right advice
Trusts are not about hiding money or avoiding tax. They’re about planning sensibly, thinking ahead, structuring your wealth in a way that reflects your values, and making sure your family is looked after when you’re no longer here to do it yourself.
If you’re worried about inheritance tax, concerned about passing money to the next generation too soon, or simply want more control over what happens to your assets, then a trust might be worth exploring. But it’s not the kind of thing you want to Google your way through.
Next Steps
At ETC, we help clients understand whether a trust is the right fit for their estate and if it is, we make sure it’s set up properly, tax-efficiently, and with a clear long-term plan in place.
Every family is different. Every estate is different. And every trust should be tailored to match.
If you want to discuss whether a trust is right for you, do not hesitate to get in touch.
