Do I pay UK inheritance tax on foreign property?

If you are UK-domiciled, your foreign property is subject to UK IHT as part of your worldwide estate. The foreign country may also charge tax, but double taxation relief can reduce the UK IHT. The IHT treatment of foreign property depends on your domicile status: (1) UK-domiciled individuals — subject to UK IHT on worldwide assets, including foreign property. The foreign property is part of the estate and is subject to IHT at 40% above the nil-rate band. (2) Non-UK-domiciled individuals — subject to UK IHT only on UK-sited assets. Foreign property is not subject to UK IHT (but may be subject to tax in the foreign country). The foreign country where the property is located may also charge inheritance tax, estate duty, or equivalent tax on the property. If the same property is taxed in both the UK and the foreign country, double taxation relief (DTR) can provide a credit for the foreign tax, reducing the UK IHT. The UK has double taxation treaties with some countries that determine which country has the primary taxing right. Without a treaty, the UK gives unilateral relief for foreign tax paid on the same assets. Relevant legislation: Inheritance Tax Act 1984, Section 5 (chargeable estate — worldwide for UK-domiciled); Section 159 (double taxation relief); Finance Act 2025 (domicile changes). Example: A UK-domiciled individual owns a holiday home in France worth £400,000. On death, the property is part of the UK estate and subject to IHT at 40% (after allowances). France also charges inheritance tax on the property. DTR gives a credit for the French tax, reducing the UK IHT. Without DTR, the property would be taxed twice. Common mistake: Assuming that foreign property is not subject to UK IHT. For UK-domiciled individuals, worldwide assets are subject to UK IHT, regardless of where they are located.

How does domicile affect IHT?

Domicile determines the scope of IHT. UK-domiciled individuals are subject to IHT on worldwide assets. Non-UK-domiciled individuals are subject to IHT only on UK-sited assets. With the April 2025 changes, domicile is being replaced by a residence-based system for income tax and CGT, but domicile still determines IHT scope. Domicile is a general law concept that determines an individual's permanent home. For IHT purposes, domicile determines the scope of the tax: (1) UK-domiciled individuals are subject to UK IHT on their worldwide assets. All assets, wherever located, are part of the estate for IHT purposes. (2) Non-UK-domiciled individuals are subject to UK IHT only on UK-sited assets (e.g., UK property, UK bank accounts, shares in UK companies). Foreign assets are not subject to UK IHT. (3) 'Deemed domicile' — individuals who have been UK resident for at least 15 of the last 20 tax years are 'deemed domiciled' in the UK for IHT purposes, regardless of their actual domicile. From April 2025, the concept of domicile is being replaced by a residence-based system for income tax and CGT (the FIG regime). However, domicile (or deemed domicile) still determines the scope of IHT. The transition creates complexity for individuals with international connections, and the interaction between the new and old rules requires specialist advice. Relevant legislation: Inheritance Tax Act 1984, Section 267 (domicile); Section 267A (deemed domicile); Finance Act 2017 (deemed domicile changes); Finance Act 2025 (FIG regime). Example: A US citizen has lived in the UK for 10 years and is not UK-domiciled. They are subject to UK IHT only on UK-sited assets (e.g., UK property, UK bank accounts). Their US assets are not subject to UK IHT. If they have lived in the UK for 15+ years, they become deemed domiciled and are subject to UK IHT on worldwide assets, including US assets. Common mistake: Confusing residence with domicile. Residence determines income tax and CGT liability, while domicile determines IHT scope. An individual can be UK resident but not UK-domiciled.

What is double taxation relief for IHT on foreign assets?

Double taxation relief (DTR) provides a credit for foreign inheritance tax paid on the same assets, reducing the UK IHT. This prevents the same assets from being taxed twice — once in the UK and once in the foreign country. Double taxation relief (DTR) for IHT applies where the same assets are subject to inheritance tax in both the UK and another country. The UK gives a credit for the foreign tax paid, reducing the UK IHT on the same assets. The credit is limited to the lower of the foreign tax paid or the UK IHT due on the same assets. If the foreign tax rate is higher, the excess is lost. If the foreign tax rate is lower, the UK collects the difference. DTR can be given under: (1) A double taxation treaty — the UK has IHT treaties with some countries (e.g., the US, France, Germany) that determine which country has the primary taxing right and how relief is given. (2) Unilateral relief — where there is no treaty, the UK gives unilateral relief for foreign tax paid on the same assets. DTR must be claimed on the IHT return, with evidence of the foreign tax paid. The calculation can be complex, especially where the foreign and UK tax systems treat the assets differently. Relevant legislation: Inheritance Tax Act 1984, Section 159 (double taxation relief); TIOPA 2010 (double taxation provisions). Example: A UK-domiciled individual owns a property in Spain worth £500,000. On death, Spain charges inheritance tax of £80,000 on the property. The UK IHT on the same property is £200,000 (40% of £500,000, after allowances). DTR gives a credit of £80,000 (the lower of the Spanish tax and the UK tax). The UK IHT is reduced to £120,000 (£200,000 - £80,000). Total tax: £200,000 (Spanish £80,000 + UK £120,000). Common mistake: Not claiming DTR on the IHT return. The relief must be actively claimed with evidence of the foreign tax paid. Without a claim, the estate may pay double tax.

Are foreign bank accounts subject to UK IHT?

If you are UK-domiciled, foreign bank accounts are subject to UK IHT as part of your worldwide estate. If you are non-UK-domiciled, foreign bank accounts are not subject to UK IHT (only UK-sited assets are). The IHT treatment of foreign bank accounts depends on domicile: (1) UK-domiciled individuals — foreign bank accounts are part of the worldwide estate and are subject to UK IHT. The location of the bank account (not the currency) determines whether it is foreign-sited. (2) Non-UK-domiciled individuals — foreign bank accounts are not subject to UK IHT, as they are foreign-sited assets. Only UK-sited assets (e.g., UK bank accounts, UK property, shares in UK companies) are subject to UK IHT. It is important to distinguish between the location of the asset and the location of the account. For example, shares in a UK company held in a foreign brokerage account are UK-sited assets (the location of the share register determines the situs). Foreign currency held in a UK bank account is a foreign-sited asset (the location of the account does not determine the situs of currency). Relevant legislation: Inheritance Tax Act 1984, Section 5 (chargeable estate); Section 160 (situs of assets). Example: A UK-domiciled individual has £200,000 in a Spanish bank account and £100,000 in a UK bank account. Both are subject to UK IHT (worldwide estate). A non-UK-domiciled individual with the same accounts: only the £100,000 in the UK bank account is subject to UK IHT. The £200,000 in the Spanish bank account is not subject to UK IHT. Common mistake: Assuming that the location of the bank determines the situs of the asset. The situs of shares is determined by the location of the share register, and the situs of currency is determined by the location of the debt (i.e., where the bank is located).

How do I administer an estate with assets in multiple countries?

Administering an international estate involves obtaining probate in each country, filing tax returns in each country, and dealing with foreign tax authorities. Specialist cross-border advice is essential. Administering an estate with assets in multiple countries is complex and involves: (1) UK probate and IHT — the executors must obtain UK probate and file the IHT return, reporting all worldwide assets (for UK-domiciled individuals). (2) Foreign probate — the executors may need to obtain probate (or equivalent) in each country where assets are located. Some countries require a local 're-sealing' of UK probate, while others require a separate probate process. (3) Foreign tax returns — the executors may need to file inheritance tax or equivalent returns in each country, and pay any foreign tax due. (4) Double taxation relief — the executors should claim DTR on the UK IHT return for any foreign tax paid on the same assets. (5) Currency conversion — assets in foreign currencies must be converted to sterling for the IHT return, using the exchange rate at the date of death. (6) Foreign legal advice — the executors may need to engage lawyers in each country to deal with local law requirements. The administration can take significantly longer than a UK-only estate, and specialist cross-border advice is essential. Relevant legislation: Inheritance Tax Act 1984 (IHT provisions); foreign probate and tax laws; double taxation treaties. Example: A UK-domiciled individual dies with assets in the UK (£500,000), France (a holiday home worth £300,000), and the US (shares worth £200,000). The executors must: (1) File a UK IHT return reporting all assets (£1 million). (2) Obtain French probate for the holiday home and file a French inheritance tax return. (3) Obtain US probate for the shares and file a US estate tax return. (4) Claim DTR on the UK IHT return for the French and US tax paid. Common mistake: Underestimating the complexity and time required to administer an international estate. Executors should engage specialist cross-border advisers early in the process.

How do the April 2025 domicile changes affect IHT?

The April 2025 changes replace the remittance basis with the FIG regime for income tax and CGT. For IHT, domicile still determines the scope of the tax, but the changes create complexity for individuals transitioning between the old and new rules. From 6 April 2025, the remittance basis for non-domiciliaries was abolished and replaced by the Foreign Income and Gains (FIG) regime for income tax and CGT. However, for IHT purposes, domicile (and deemed domicile) still determines the scope of the tax. The key IHT implications of the April 2025 changes: (1) Existing non-doms who become deemed domiciled (after 15 years of UK residence) are subject to IHT on worldwide assets. (2) The FIG regime does not change the IHT domicile rules — domicile still determines whether worldwide or only UK-sited assets are subject to IHT. (3) Transitional provisions may apply for individuals who were on the remittance basis before April 2025. (4) Offshore trusts established before 6 April 2025 may retain some protection, but the interaction with the new rules is complex. (5) Former non-doms who have been in the UK for many years should review their IHT position, as they may now be subject to IHT on worldwide assets. The transition creates significant complexity, and specialist advice is essential for individuals with international connections. Relevant legislation: Finance Act 2025 (FIG regime); Inheritance Tax Act 1984, Sections 267-267A (domicile and deemed domicile for IHT). Example: A US citizen who has lived in the UK for 16 years is now deemed domiciled for IHT purposes. They are subject to UK IHT on worldwide assets, including their US property and investments. They should review their estate plan and consider IHT planning strategies, such as lifetime gifting, trust structures, and life insurance. Common mistake: Assuming that the April 2025 changes only affect income tax and CGT. While the FIG regime replaces the remittance basis for income tax and CGT, domicile still determines IHT scope, and former non-doms may now be subject to IHT on worldwide assets.

IHT Advisory › International

IHT on Foreign Assets & International Estates

If you own assets abroad or have international connections, IHT planning is more complex. Understand how IHT applies to foreign assets, double taxation relief, and the domicile rules.

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Inheritance tax on foreign assets adds a layer of complexity to estate planning. If you own property, investments, or other assets abroad, or if you have international family connections, understanding how IHT applies to foreign assets is essential. The rules depend on your domicile status, the location of the assets, and any applicable double taxation treaties.

Domicile and IHT Scope

IHT applies to the worldwide assets of UK-domiciled individuals. For non-UK-domiciled individuals, IHT applies only to UK-sited assets. With the abolition of the remittance basis from April 2025, the concept of domicile for tax purposes is being replaced by a residence-based system, but domicile still determines the scope of IHT. The transition creates complexity for individuals with international connections, and specialist advice is essential.

IHT on Overseas Property

If you are UK-domiciled, your overseas property is subject to UK IHT as part of your worldwide estate. The foreign country may also charge inheritance tax or estate duty on the same property. Double taxation relief (DTR) can provide a credit for foreign tax paid, reducing the UK IHT. The UK has double taxation treaties with some countries that determine which country has the primary taxing right. Without a treaty, the UK gives unilateral relief for foreign tax paid on the same assets.

Foreign Bank Accounts and Investments

Foreign bank accounts, investments, and shares are treated as part of the worldwide estate for UK-domiciled individuals and are subject to UK IHT. The location of the asset (not the location of the account or broker) determines whether it is UK-sited or foreign-sited. For example, shares in a UK company held in a foreign brokerage account are UK-sited assets. Foreign currency held in a UK bank account is a foreign-sited asset.

International Estate Administration

Administering an international estate involves navigating the probate and tax systems of multiple countries. The executors may need to obtain probate in each country where assets are located, and may need to deal with foreign tax authorities. IHT returns must be filed in the UK, and equivalent returns may need to be filed in foreign countries. The administration can be complex and time-consuming, and specialist advice from a cross-border tax adviser is essential.

Key Points

What You Need to Know

UK-domiciled individuals are subject to IHT on worldwide assets
Non-UK-domiciled individuals are subject to IHT only on UK-sited assets
Double taxation relief provides a credit for foreign tax paid on the same assets
The location of the asset (not the account) determines whether it is UK or foreign-sited
International estate administration requires specialist cross-border advice

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