Inheritance Tax on Overseas Property UK: IHT on Foreign Assets, Domicile, and Double Tax Treaties (2026)
UK domiciled individuals pay IHT on their worldwide estate — including property in France, Spain, Australia, and any other country. From April 2025, long-term UK residents (10+ consecutive years UK resident) also face IHT on foreign assets. Double tax treaties and unilateral credit relief (s159 IHTA 1984) reduce but do not eliminate double taxation in many cases.
| Scenario | IHT on Foreign Assets? | IHT on UK Assets? | Notes |
|---|---|---|---|
| UK domicile (any residence) | Yes — worldwide estate | Yes | s267 IHTA 1984 — worldwide charge |
| Long-term UK resident (10+ of last 20yr UK residence) — any domicile | Yes — worldwide estate | Yes | April 2025 LTUK test; tail period on leaving UK |
| Non-UK domicile + not long-term UK resident | No — foreign assets excluded | Yes — UK situs only | Only UK situs property, UK shares, UK bank accounts taxed |
| UK domicile, overseas property in treaty country (France, Italy, USA, etc.) | Yes — treaty credit may reduce IHT | Yes | Credit for foreign tax; may still leave UK IHT payable |
| UK domicile, overseas property in non-treaty country | Yes — unilateral credit (s159 IHTA) may reduce IHT | Yes | Credit up to lower of foreign tax or UK IHT on that asset |
| Foreign business interest — BPR qualifying | Yes — but 100% BPR (up to £1m cap from April 2026) | Yes — same | Trading test and 2yr ownership still required for foreign businesses |
| Overseas property reported on IHT417 | Yes — valued at date of death exchange rate | Yes | Sterling equivalent at spot rate on date of death |
2026/27. Domicile: domicile of origin vs domicile of choice — change requires genuine, permanent intention to remain in new country. Long-term UK resident (LTUK): 10+ consecutive years UK resident in last 20 (April 2025 — Finance Act 2025). IHT417: supplementary schedule to IHT400 for all overseas assets. Double tax treaties: France, Italy, USA, India, Pakistan, South Africa, Netherlands, Sweden, Switzerland. Unilateral credit: s159 IHTA 1984. BPR cap: £1m combined BPR/APR from April 2026.
IHT on Overseas Property: Complete Guide
UK domicile and worldwide IHT — the fundamental rule
UK inheritance tax applies to the worldwide estate of a person domiciled in the UK at the date of death (s267 IHTA 1984). This means: UK property, overseas property, foreign bank accounts, offshore investments, shares in foreign companies, valuables stored abroad — all are included in the IHT estate if the deceased was UK domiciled. UK situs property: assets with a UK situs (UK land, UK company shares, UK bank accounts, UK-registered intellectual property) are subject to IHT regardless of the deceased's domicile. So a person domiciled in France who owns a UK property will still pay IHT on the UK property value at death. Non-UK situs property: for persons not domiciled (and not long-term UK resident) in the UK, foreign assets fall outside the IHT estate. Only UK situs assets are charged. This distinction means domicile is one of the most important questions in international estate planning. Domicile of origin: acquired at birth (usually the country where the father was domiciled at the time of birth). Domicile of choice: acquired by taking up residence in another country with the intention of remaining there permanently. UK nationals living abroad may retain their UK domicile of origin unless they acquire a domicile of choice in another country — this is a high legal bar and requires genuine, permanent intent.
Long-term UK resident rule (from April 2025) — replacing deemed domicile
Until 5 April 2025, the UK had a 'deemed domicile' rule: a person who had been UK resident for 15 out of the previous 20 tax years was treated as UK domiciled for IHT on all worldwide assets. From 6 April 2025, a new long-term UK resident (LTUK) test replaced deemed domicile. Under the new test: a person who has been UK resident for 10 or more consecutive tax years in the last 20 tax years is a 'long-term UK resident' and is subject to IHT on their worldwide assets. 'Tail period': once a person becomes a long-term UK resident, they may remain subject to IHT on foreign assets for a 'tail period' even after leaving the UK — the tail period depends on how long they were UK resident (up to 10 years for very long-term residents). Non-domiciled individuals who arrived in the UK after April 2025 and are not yet long-term UK residents: only their UK situs assets are subject to IHT. The April 2025 change also introduced an 'overseas workday relief' expansion and changes to the remittance basis — but those primarily affect income tax and CGT rather than IHT. Key point: many foreign nationals who have lived in the UK for more than 10 years are now subject to IHT on their worldwide estates even if they retain their foreign domicile of origin.
Reporting overseas assets — IHT417 and the IHT400
All foreign assets must be reported on form IHT417 (overseas assets schedule), which is attached to the main IHT400 return. IHT417 requires: (1) A description of each overseas asset; (2) The country in which it is located; (3) The value at the date of death in the local currency; (4) The sterling equivalent (converted at the spot exchange rate on the date of death — not the date of submission); (5) Evidence of the foreign asset (foreign property title deed, bank statements, share certificates); (6) Any liabilities secured against the foreign asset. Valuing overseas property: the market value at the date of death is required — a professional valuation from a local estate agent or property valuer in the relevant country is standard. HMRC accepts foreign professional valuations. The exchange rate: use the spot GBP/foreign currency rate on the date of death (available from HMRC's exchange rate tables or a commercial source). Currency fluctuations: if the estate is not distributed for many months, the sterling value may change between the date of death valuation (for IHT) and the actual realisation — this is an inherent risk but does not affect the IHT calculation (which is fixed at the date of death values). Foreign bank accounts: HMRC increasingly shares information with overseas tax authorities under CRS/AEOI (Common Reporting Standard) — undisclosed foreign accounts are a significant risk; HMRC can discover them and may pursue penalties as well as the IHT.
Double tax treaties and unilateral credit relief — avoiding IHT on the same asset twice
Where an overseas country also charges its own inheritance or estate tax on assets located in that country, the same asset can potentially be taxed twice: once by the UK (IHT on the worldwide estate) and once by the foreign country (local inheritance tax). UK double tax treaties: the UK has bilateral inheritance tax / estate duty treaties with France, Italy, the United States (estate tax), India, Pakistan, South Africa, the Netherlands, Sweden, and Switzerland. Each treaty sets out rules for which country has primary taxing rights over which assets and provides for credit to eliminate or reduce double taxation. The US estate tax treaty: for a UK domiciliary who owns US assets, the treaty allocates the taxing rights and provides for a credit. Note: US estate tax has its own threshold ($13.6m in 2025 — subject to change) and state-level estate taxes may also apply. Unilateral credit relief (s159 IHTA 1984): where there is no treaty, HMRC provides unilateral credit for foreign tax paid on the same asset. The credit is limited to the lower of the foreign tax paid and the UK IHT attributable to that asset. Calculating the credit: the UK IHT on the foreign asset = (value of foreign asset / total estate value) × total UK IHT. The credit reduces the UK IHT — the foreign tax is not refunded. Countries with high inheritance taxes (France, Germany, Japan) and no full UK treaty: the effective combined tax burden can be substantial — specialist international estate planning advice is strongly recommended.
BPR and APR on overseas assets — limited relief for foreign property
Business Property Relief (BPR — ss103-114 IHTA 1984): BPR can apply to foreign business interests provided the business is carried on as a business within the meaning of the UK legislation. A sole trader business operating in France can qualify for 100% BPR (s105(1)(a) IHTA) if it satisfies the same conditions as a UK business (2-year ownership, trading test, no excepted assets). Unquoted shares in foreign companies: can qualify for 100% BPR (s105(1)(bb)) — there is no UK residence or situs requirement for the company itself. Agricultural Property Relief (APR — ss115-124 IHTA 1984): APR applies to agricultural property in the UK, Channel Islands, Isle of Man, and the European Economic Area (EEA). Note: following Brexit and various legislative changes, APR availability for EEA property should be confirmed with a specialist. Agricultural land in other overseas countries (France, Spain, Portugal, USA, Australia, etc.) does not qualify for UK APR. If such land is used in an agricultural business, BPR may apply as an alternative — but the trading test must be satisfied. April 2026 BPR/APR cap: the £1m combined BPR/APR cap at 100% applies regardless of whether the qualifying assets are UK or foreign.
Frequently Asked Questions
Do I pay inheritance tax on property abroad if I am UK domiciled?
Yes — if you are UK domiciled (or a long-term UK resident from April 2025), UK inheritance tax applies to your worldwide estate including property abroad. The overseas property is valued at market value in the local currency on the date of death, converted to sterling at the spot exchange rate on that date, and reported on form IHT417 with the IHT400. A double tax treaty (where one exists) or unilateral credit relief (s159 IHTA 1984) may reduce the IHT if the foreign country also charges inheritance tax on the same property.
What is the long-term UK resident rule for inheritance tax?
From 6 April 2025, the old 'deemed domicile' rule was replaced by the long-term UK resident (LTUK) test. Under the LTUK test: if you have been UK tax resident for 10 or more consecutive years in the last 20 tax years, you are a long-term UK resident for IHT purposes and subject to IHT on your worldwide assets — even if you retain a foreign domicile of origin. A 'tail period' continues LTUK status for some years after leaving the UK. Non-domiciled individuals who have been UK resident for fewer than 10 consecutive years: only UK situs assets are subject to IHT.
Is there double inheritance tax on overseas property?
Potentially yes — if both the UK (IHT on worldwide estate) and the foreign country charge inheritance tax on the same asset, double taxation can arise. UK relief: (1) Treaty relief: UK double tax treaties with France, Italy, USA, India, Pakistan, South Africa, Netherlands, Sweden, Switzerland provide credit mechanisms; (2) Unilateral credit (s159 IHTA 1984): where no treaty, HMRC gives credit for foreign inheritance tax paid on the same asset, up to the lower of the foreign tax paid or the UK IHT attributable to that asset. The combined burden can still be significant — specialist international estate planning advice is recommended.
What form do I use to report overseas assets for inheritance tax?
Form IHT417 — 'Foreign assets' — is the supplementary schedule to the IHT400 for overseas assets. All foreign property, bank accounts, investments, and other assets must be listed on IHT417 with a description, country, date-of-death value in local currency, sterling equivalent at the date-of-death exchange rate, and any liabilities secured against the asset. HMRC increasingly cross-references IHT returns against CRS/AEOI data from foreign tax authorities — undisclosed foreign assets can attract significant penalties.
Does Business Property Relief apply to a foreign business?
Business Property Relief (BPR — ss103-114 IHTA 1984) can apply to foreign business interests if the conditions are met. A sole trader business in France, or unquoted shares in a foreign company, can qualify for 100% BPR under the same conditions as a UK business: 2+ years' ownership (s106 IHTA), trading test (not wholly/mainly investment — s105(3) IHTA), and no excepted assets (s112 IHTA). The April 2026 combined BPR/APR cap of £1m at 100% applies equally to foreign qualifying business interests. Agricultural Property Relief: does NOT apply to overseas farmland except for Channel Islands and Isle of Man property (and historically EEA — check post-Brexit position).
Foreign Assets in Your Will — Make Sure They Are Covered
Overseas property requires careful will drafting — UK wills may not be recognised for assets in all countries, and a foreign will or notarial deed may be needed in addition to the UK will. WillSafe will kits from £39.99 cover England and Wales; specialist advice is recommended for significant overseas assets.
View Will Kits from £39.99