IHT on Offshore Assets and Foreign Property UK 2026: Domicile, LTUK Test, Situs Rules, and Double Tax Treaties
UK IHT on foreign assets depends on domicile — UK doms and Long-Term UK Residents (10 of last 20 tax years) pay IHT on worldwide assets. Non-doms pay only on UK-situs assets. The April 2025 reform cut the threshold from 15 to 10 years.
| Asset Type | Situs | UK Dom / LTUK: UK IHT? | Non-Dom / Non-LTUK: Excluded Property? | Notes |
|---|---|---|---|---|
| UK real estate (freehold or leasehold) | UK-situs | YES — full UK IHT on value at death. Included in UK IHT estate regardless of domicile. A non-dom who owns a UK investment property is subject to UK IHT on the full market value of that property. | NO — UK real estate is NEVER excluded property under s6 IHTA 1984. Even a non-dom owning UK property has full UK IHT exposure on the UK property (but not on their foreign assets). | UK residential property held through offshore company structures was brought into the UK IHT net by Finance Act 2017 (ATED/NRCGT regime). Non-doms can no longer use offshore companies to shelter UK residential property from IHT. Direct ownership and indirect ownership through most structures: subject to UK IHT. |
| Foreign real estate (holiday home, investment property abroad) | Foreign-situs (sited where the property is physically located) | YES — a UK-domiciled (or LTUK) individual has UK IHT on worldwide assets; their French villa, Spanish apartment, or US condo is included in the UK IHT estate at market value. | YES (excluded property — s6(1)/s48 IHTA) — a non-UK domiciled, non-LTUK individual: foreign property is excluded property; no UK IHT on the foreign property. Only the UK-situs assets (UK property, UK company shares, etc.) are subject to UK IHT. | UK dom with foreign property: may also face inheritance/estate tax in the country where the property is located. Double tax treaty may prevent double taxation. Unilateral credit (s159 IHTA) available where no treaty. |
| Shares in UK company (quoted or unquoted) | UK-situs (registered in England/Scotland/Wales/Northern Ireland) | YES — shares in UK-registered companies are UK-situs. Subject to UK IHT for UK doms. BPR may reduce or eliminate IHT on qualifying unquoted trading company shares (subject to £1m cap from April 2026). | NO — shares in UK companies are UK-situs assets. Even a non-dom holding shares in a UK PLC or private company has UK IHT on those shares. The shares are not excluded property. | Situs of shares: generally where the company is incorporated and where the share register is maintained. Shares in an English company: UK-situs. Shares in a French company (even if traded on London Stock Exchange as ADRs): French-situs (excluded property for non-doms). |
| Shares in foreign company (listed or private) | Foreign-situs (sited in country of incorporation) | YES — UK dom: worldwide estate; shares in Apple (US), LVMH (France), or Samsung (Korea) are all included in the UK IHT estate. | YES — foreign company shares are excluded property for non-doms/non-LTUK. A Hong Kong resident non-dom who owns shares in a Chinese company: those shares are outside the UK IHT estate. | Many non-doms hold shares in UK-quoted companies via offshore nominees or custodians. Even if the shares are held via a UK bank or broker, what matters is where the company is incorporated — not where the shares are held or traded. |
| UK bank and building society accounts | UK-situs (where the bank branch maintaining the account is located) | YES — UK bank accounts are UK-situs assets; included in UK IHT estate for UK doms. | NO — UK bank accounts are UK-situs; NOT excluded property for non-doms. A non-dom with a current account at a UK bank has UK IHT on that account balance. | Non-doms should consider keeping UK accounts at a minimum and maintaining savings in overseas bank accounts (foreign-situs — excluded property). The situs rule for bank accounts: the branch where the account is maintained; an account at Barclays UK = UK-situs even if the non-dom lives abroad. |
| Foreign bank accounts (accounts with non-UK banks) | Foreign-situs (where the bank branch is located) | YES — UK dom: foreign bank accounts included in worldwide IHT estate. | YES — foreign bank accounts are excluded property for non-doms/non-LTUK. Savings held with a Swiss, French, or UAE bank: outside the UK IHT estate for a non-dom. | Non-doms who have significant savings: holding them in foreign bank accounts (rather than UK bank accounts) preserves excluded property status. For UK doms returning to the UK: if they have not yet acquired UK domicile (or are within the first 10 years of UK tax residence for LTUK purposes), their foreign bank savings may remain excluded property. |
| UK government securities (gilts) held by non-doms | UK-situs | YES — UK gilts are UK-situs assets for UK doms. | SPECIAL RULE: certain UK government securities held by non-doms may be exempt from UK IHT under the Exemption for Government Securities held by non-domiciliaries (HMRC IHTM04231 — based on specific issue terms). This is an older relief and specific securities must qualify; it does not apply to all gilts. | For most purposes, UK gilts are UK-situs and subject to UK IHT for UK doms. Non-doms should check specific gilt issue terms; newer gilts issued since 1980 generally do not include the non-dom IHT exemption. |
IHT offshore assets UK 2026. UK domicile → worldwide IHT (s6 IHTA 1984). Non-UK domicile, non-LTUK → UK-situs assets only; foreign-situs = excluded property (s6(1)/s48 IHTA). LTUK test (Finance Act 2025, from 6 April 2025): Long-Term UK Resident = 10 of last 20 UK tax years → worldwide IHT. 10yr exit tail after leaving UK (compared to old deemed domicile 15/20yr test — s267 IHTA now abolished). Situs rules: UK real estate = UK-situs (always in UK IHT estate regardless of domicile); foreign real estate = foreign-situs (excluded property for non-doms); UK company shares = UK-situs; foreign company shares = foreign-situs (sited where company incorporated); UK bank accounts = UK-situs (sited at UK branch maintaining account); foreign bank accounts = foreign-situs (excluded property for non-doms). Double tax treaties: USA (US/UK Estate Tax Convention 1980); France; Italy; Netherlands; South Africa; Sweden; India; Pakistan. Unilateral credit: s159 IHTA — credit for foreign estate/inheritance tax on same asset; capped at lower of UK IHT or foreign tax. Non-dom spouse election: s267ZA IHTA — irrevocable; treated as UK dom for IHT; allows unlimited s18 spousal exemption. EPTs (Excluded Property Trusts): foreign-situs assets in trust pre-April 2025 → retained excluded property status (transitional provisions Finance Act 2025); new EPTs post-April 2025 → excluded property only if settlor not yet LTUK at settlement. UK residential property via offshore company: Finance Act 2017 — within UK IHT net; offshore wrapper no longer shelters UK residential property. Brussels IV Regulation (EU 650/2012 / UK equivalent post-Brexit): forced heirship in EU member states; French/Spanish property may have forced heirship restrictions even for UK dom testators. NRB: £325k (s8C IHTA — frozen to April 2030). BPR: subject to £1m cap from April 2026. Double probate: separate grant required in each foreign jurisdiction; local legal advice essential.
IHT on Offshore Assets: Complete Guide
The Long-Term UK Resident (LTUK) test — how the April 2025 reform changed non-dom IHT
Before 6 April 2025, a non-UK domiciled individual became 'deemed domiciled' for UK IHT purposes after residing in the UK for 15 of the previous 20 tax years (s267 IHTA 1984 — the '15/20 year rule'). Once deemed domiciled, their worldwide estate was subject to UK IHT. The Finance Act 2025 abolished deemed domicile and replaced it with the Long-Term UK Resident (LTUK) test: an individual is 'long-term UK resident' — and subject to UK IHT on their worldwide assets — if they have been UK tax resident for 10 or more of the previous 20 tax years. The LTUK test applies from 6 April 2025. Key changes from the old rule: (1) Threshold reduced: from 15 years to 10 years of UK residence → individuals become subject to worldwide IHT sooner. (2) 10-year exit tail: once LTUK status is acquired, a person remains within the worldwide IHT scope for 10 years after leaving the UK (even if they emigrate; even if they re-establish foreign domicile). Under the old rules, leaving the UK could remove deemed domicile more quickly. (3) Transitional provisions: individuals who were non-dom under the old rules but become LTUK under the new rules on 6 April 2025 were given transitional protections in some cases — specialist advice is essential. (4) Pre-April 2025 Excluded Property Trusts (EPTs): assets settled into EPTs before 6 April 2025 retain excluded property status under transitional provisions, even if the settlor subsequently becomes LTUK — provided the assets are foreign-situs. New EPT settlements after April 2025: foreign assets come into scope if the settlor becomes LTUK.
Double tax treaties — preventing IHT being charged twice on the same foreign asset
When a UK-domiciled (or LTUK) individual owns foreign property, there is a risk of double taxation: the UK charges IHT on the worldwide estate (including the foreign property), and the country where the property is located may also charge its own death/estate/inheritance tax. The UK has bilateral double tax treaties covering IHT or estate tax with: USA (US/UK estate tax convention 1980); France (UK/France double taxation convention — covers succession duties); Italy; Netherlands; Pakistan; India; South Africa; Sweden; and a few others. Each treaty provides relief from double taxation by allocating taxing rights between the two countries or providing a credit against one country's tax for tax paid to the other. Where no treaty exists: s159 IHTA 1984 provides unilateral relief — the UK will give credit against UK IHT for foreign estate/inheritance tax paid on the same asset. The credit is limited to the lower of the UK IHT attributable to the foreign asset and the foreign tax paid on that asset. In practice, many UK doms with significant foreign property holdings work with lawyers or accountants in both the UK and the relevant foreign jurisdiction to coordinate the estate administration across both countries — addressing probate requirements, local inheritance formalities, and the treaty credit.
Planning for UK-domiciled individuals with significant foreign assets
UK-domiciled (or LTUK) individuals with significant foreign assets face UK IHT on their worldwide estate. The standard IHT planning tools apply — NRB (£325k), RNRB (£175k if applicable), tNRB/tRNRB for spouses, lifetime gifts (PETs), normal expenditure from income (s21 IHTA), BPR on qualifying business assets, charitable gifts. For the foreign assets specifically: (1) Dual probate: the executor may need to administer the estate in both the UK and the foreign jurisdiction — requiring a local grant in the foreign country (re-sealed English grant or local letters of administration). Legal advice in each jurisdiction is essential. (2) Foreign inheritance restrictions: some countries have 'forced heirship' rules (e.g., France under the Brussels IV Regulation on Succession — Regulation EU 650/2012 now replicated in UK domestic law post-Brexit) that restrict testamentary freedom. Even if the UK will specifies beneficiaries for the French property, French forced heirship may require a portion to pass to children. (3) Converting foreign property to UK-situs assets: for those with large foreign portfolios, restructuring to hold foreign assets through a UK-incorporated holding company (if BPR-qualifying) — though the shares in the UK company would be UK-situs, the BPR may eliminate IHT if the underlying company is a qualifying trading entity.
Planning for non-UK domiciled individuals approaching LTUK status
For non-UK domiciled individuals who have been in the UK for 7-9 years and are approaching LTUK status (10 years), there is a narrow planning window. Strategies before reaching 10 years: (1) Establish or contribute to an Excluded Property Trust (EPT): settle foreign-situs assets into a trust before the 10-year LTUK threshold is crossed. Post-April 2025 transitional provisions mean pre-April 2025 EPTs retain excluded property status — but new EPTs settled after April 2025 only retain excluded property status if the settlor has not yet become LTUK at the time of settlement. Once LTUK: new settlements of foreign assets into trust do not become excluded property. (2) Restructure foreign investments: ensure foreign-situs assets (foreign bank accounts, foreign company shares, foreign property) remain structured to retain excluded property status. UK-situs assets are always subject to UK IHT. (3) Consider leaving the UK: if the LTUK threshold has not been crossed, emigrating before 10 UK tax years avoids worldwide UK IHT exposure. For those who have already been LTUK: the 10-year exit tail means staying non-resident for 10 years is needed before exiting the worldwide IHT scope entirely. (4) Non-dom spouse election (s267ZA IHTA): a non-UK dom spouse of a UK dom can elect to be treated as UK domiciled for IHT — irrevocable; gives the unlimited s18 spousal exemption on assets received from the UK dom spouse. This is beneficial if the UK dom spouse's estate is large and would otherwise face significant IHT on assets passing to the non-dom spouse.
Practical considerations for foreign assets — administration and probate
Administering an estate with foreign assets adds significant complexity. Key practical points: (1) Each country has its own probate/succession process: in many civil law countries (France, Spain, Germany, Italy), there is no equivalent to UK probate — instead a notary handles the succession formalities. The UK will may not be automatically recognised; a translation and apostille may be required, and local succession law may impose restrictions. (2) Foreign tax filing: many countries require separate estate or inheritance tax returns filed with their own tax authority — in addition to the UK IHT400. Missing foreign filing deadlines can trigger penalties and interest. (3) Property register updates: for foreign real estate, title must be transferred in the foreign land registry — requiring local legal formalities, which can take months or even years in some jurisdictions. (4) Foreign company shareholdings: shares in foreign private companies may require company board resolutions, share certificate transfers, and foreign company law formalities. (5) Foreign bank accounts: releasing funds from foreign bank accounts for IHT payment in the UK may require proof of death (translated), local legal process, and may take significant time — leaving the UK executor without funds to pay UK IHT promptly. Planning: identify all foreign assets early in estate administration; instruct local lawyers in each foreign jurisdiction; explore whether the HMRC Direct Payment Scheme or estate bridging finance can provide UK IHT funds while foreign assets are being realised.
Frequently Asked Questions
Do UK citizens pay inheritance tax on foreign property?
Yes — UK-domiciled individuals (or Long-Term UK Residents — LTUK — under the April 2025 reform) pay UK IHT on their worldwide estate, including all foreign property, overseas bank accounts, and foreign investments. UK IHT is charged at 40% on the worldwide net estate above the NRB (£325,000). Double tax treaty relief (where a treaty exists with the foreign country) or unilateral credit (s159 IHTA) may prevent the same asset being taxed twice by both the UK and the foreign country. Non-UK domiciled individuals who are NOT LTUK: only pay UK IHT on UK-situs assets; foreign property is 'excluded property' (s6(1) IHTA) and outside the UK IHT estate.
What is the LTUK test for inheritance tax introduced in April 2025?
The Long-Term UK Resident (LTUK) test (Finance Act 2025, from 6 April 2025) replaced the old deemed domicile rules. Under the LTUK test: an individual is subject to UK IHT on their worldwide assets if they have been UK tax resident for 10 or more of the previous 20 tax years. This replaced the previous 15/20 year deemed domicile test. 10-year exit tail: once LTUK status is acquired, the individual remains subject to worldwide UK IHT for 10 years after leaving the UK — even if they re-establish foreign domicile abroad. Transitional provisions apply for those who were non-dom under the old rules; specialist advice is essential. Pre-April 2025 Excluded Property Trusts (EPTs) retain their excluded property status under transitional provisions.
Are foreign bank accounts subject to UK inheritance tax?
It depends on the deceased's domicile (or LTUK status). UK-domiciled / LTUK individuals: yes — foreign bank accounts are included in the worldwide IHT estate at their full balance at the date of death. The IHT is charged at 40% on the estate above the NRB. Double tax relief may be available if the foreign country also taxes the account. Non-UK domiciled / non-LTUK individuals: no — foreign bank accounts are foreign-situs assets (sited where the bank branch is located) and are excluded property under s6(1) IHTA 1984. They are outside the UK IHT estate entirely. UK bank accounts: UK-situs; subject to UK IHT even for non-doms. Non-doms should keep savings in foreign bank accounts (not UK accounts) to preserve excluded property status.
Does the UK have a double tax treaty for inheritance tax?
Yes — the UK has bilateral IHT/estate tax treaties with several countries: USA (US/UK Estate Tax Convention 1980), France, Italy, Netherlands, South Africa, Sweden, India, Pakistan, and a few others. These treaties prevent the same asset being taxed twice — by both the UK (IHT) and the foreign country (estate/inheritance tax). Where no treaty exists: s159 IHTA 1984 provides unilateral relief — the UK gives a credit against UK IHT for foreign estate/inheritance tax paid on the same asset (credit limited to the lower of UK IHT attributable to the foreign asset and foreign tax paid). Note: the scope and terms of each treaty differ significantly — specialist cross-border estate planning advice is essential for those with significant foreign assets.
Can a non-dom buy UK property without paying UK inheritance tax?
No — UK real estate is always UK-situs and subject to UK IHT regardless of the owner's domicile. A non-UK domiciled individual who owns a UK property (whether as a residence or investment) has UK IHT on the full market value of that property at death. This applies even if the individual is non-dom and would otherwise only pay UK IHT on UK-situs assets. Finance Act 2017 also removed the ability to use offshore company structures to shelter UK residential property from UK IHT — UK residential property held through offshore companies is now within the UK IHT net via the Dwelling-Related Liabilities and NRB legislation. The general principle: non-doms are only subject to UK IHT on UK-situs assets — but UK real estate is always UK-situs.
Cross-Border IHT Requires Specialist Advice
Estates with foreign assets, non-UK domicile issues, or LTUK questions involve complex interactions between UK IHT law, foreign succession law, and international treaties. This page provides educational information only — not legal or tax advice. Always instruct specialist solicitors and accountants in each relevant jurisdiction.
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