Inheriting Money from Abroad UK (2026): IHT, Foreign Probate and Overseas Estates

Whether a UK resident pays UK IHT when inheriting from an overseas estate depends on the domicile of the deceased — not where the beneficiary lives, and not where the assets are located: (1) THE DOMICILE RULE — UK INHERITANCE TAX IS DOMICILE-BASED: UK IHT is charged on the worldwide estate of a person who was domiciled in the UK at the date of death (IHTA 1984 s.1 and s.6). 'Domicile' is a legal concept distinct from residence and nationality. In broad terms, domicile is the country the deceased regarded as their permanent home and to which they intended to return; (2) UK-DOMICILED DECEASED — WORLDWIDE ESTATE: if the person who died was domiciled in the UK (regardless of where they lived or where their assets were), their entire worldwide estate is subject to UK IHT. This includes: overseas bank accounts; foreign property; overseas shares; assets in trust in other jurisdictions; foreign business interests. All of these are included at open market value for UK IHT purposes; (3) NON-UK-DOMICILED DECEASED — UK ASSETS ONLY: if the person who died was NOT domiciled in the UK (a 'non-dom'), UK IHT applies only to assets 'situated' in the UK (IHTA 1984 s.6(1)). UK-situated assets include: UK property and land; UK bank accounts; shares in UK companies (wherever the share register is held); UK government securities held by non-UK residents (from April 2025); (4) WHAT 'SITUATED' MEANS FOR NON-DOMS: the situs rules determine where assets are 'situated' for IHT: shares in a UK company = UK situs; shares in a foreign company = foreign situs; bank account = situs of the bank (a UK bank account = UK situs even if held by a non-dom); real property = situs of the land; debts = generally situs of the debtor's country; (5) THE BENEFICIARY'S IHT POSITION: the beneficiary who receives an inheritance (whether UK or foreign) does not typically pay UK IHT — the liability falls on the estate of the deceased. However, if the UK beneficiary receives property that is still within the estate for IHT purposes, the IHT is charged against the estate (reducing what the beneficiary actually receives). No separate income tax or CGT arises on receipt of an inheritance in the UK (though income and capital gains generated AFTER inheritance are taxable).

Domicile for UK IHT is a complex legal concept — the 'deemed domicile' rules (IHTA 1984 s.267) mean that long-term UK residents who are not UK-domiciled by general law may still have their worldwide estate subject to UK IHT: (1) DOMICILE OF ORIGIN: every person acquires a domicile of origin at birth — usually the father's domicile (or, for illegitimate children, the mother's domicile) at the time of birth. This is often the country of birth but not always; (2) DOMICILE OF CHOICE: a person can change their domicile by: (a) taking up permanent residence in a new country; AND (b) intending to remain there permanently or indefinitely (the absence of any intention to return to the country of origin). Both factors must be present — it is not sufficient merely to live in a country for many years if the person still intends to return to their country of origin at some point; (3) DIFFICULTY OF ABANDONING UK DOMICILE: UK courts have historically been reluctant to find that a person has abandoned their UK domicile of origin. Evidence of a clear intention to remain permanently in another country and to sever ties with the UK is required. This is particularly difficult for UK nationals who have retired abroad but retain property, bank accounts, or family ties in the UK; (4) DEEMED DOMICILE — IHTA 1984 S.267 (FORMERLY 15/20; FROM APRIL 2025 SIMPLIFIED): prior to April 2025, a person who had been UK resident for 15 of the 20 preceding tax years was deemed UK domiciled for IHT. From April 2025, new rules apply: a person who has been resident in the UK for 10 tax years or more in the preceding 20 years is treated as a 'long-term UK resident' — and their worldwide assets may be subject to UK IHT. Review with a specialist — the rules transition period affects individuals who were previously non-dom and are now long-term residents; (5) IHT AND NON-DOM SPOUSES: a non-UK domiciliary spouse does not benefit from the unlimited spouse exemption (IHTA 1984 s.18). Instead, the IHT-free transferable amount on gifts/death is limited to the NRB (£325,000) or a higher amount if the surviving spouse elects to be treated as UK domiciled. Reviewing domicile status before the death of a UK-domiciled spouse with a non-dom partner is essential.

Where both the UK and a foreign country charge inheritance tax on the same assets, relief is available — either under a Double Taxation Agreement (DTA) or unilateral relief: (1) DOUBLE TAXATION AGREEMENTS (DTAs): the UK has DTA estate duty/IHT treaties with a number of countries including: France; the United States; India; Pakistan; Netherlands; Sweden; Switzerland; South Africa; and others. The specific relief available depends on the treaty. Common provisions: (a) Primary taxing right allocated to one country based on domicile or situs of assets; (b) Credit relief — the country with the secondary taxing right credits the tax paid to the country with the primary right, so the effective rate is the higher of the two (not both added together); (2) UNILATERAL RELIEF (IHTA 1984 S.159): where no DTA exists (which covers most countries, since the UK has relatively few estate IHT treaties), the UK provides unilateral relief. The UK reduces its IHT charge to give credit for foreign tax paid on the same assets. The credit is limited to the lower of the UK IHT and the foreign tax on the same assets; (3) HOW TO CLAIM RELIEF: the unilateral credit or DTA credit is claimed on HMRC form IHT400 (supplementary schedule IHT417 for foreign assets) or, for excepted estates, the form appropriate to the estate size. Evidence of the foreign tax paid (tax receipts; foreign tax assessment) must be provided; (4) NO DOUBLE TAXATION WHEN ASSETS ARE FOREIGN SITUS AND DECEASED WAS NON-DOM: if the deceased was NOT UK-domiciled and the assets are situated outside the UK, those assets are outside the UK IHT charge entirely — no UK IHT arises and no credit mechanism is needed. The foreign country's succession tax is the only applicable charge; (5) EXAMPLE — UK NATIONAL WITH FRENCH PROPERTY: UK-domiciled person dies owning French property. French succession tax (droits de succession) is payable in France on the French property (as it is French-situs property). UK IHT is also chargeable on the worldwide estate (including the French property) because the deceased was UK-domiciled. The UK/France DTA allocates primary taxing rights on French property to France; the UK grants credit against IHT for the French tax paid on the French property.

Obtaining access to assets in a foreign estate typically requires compliance with both UK and foreign legal procedures: (1) EACH COUNTRY HAS ITS OWN PROBATE PROCESS: there is no universal international probate system. When a person dies with assets in multiple countries, each country where assets are held requires its own process to transfer those assets — either by recognising the UK Grant of Probate or requiring a separate local probate process ('re-sealing' or a full local grant); (2) RECOGNISING THE UK GRANT OF PROBATE ABROAD: some Commonwealth countries (Australia; New Zealand; Canada; parts of South Africa; Singapore; certain Caribbean jurisdictions) will 're-seal' a UK Grant of Probate, accepting it without requiring a full local probate process. The executor presents the UK Grant to the local court or probate authority, which stamps (re-seals) it, giving it domestic legal force. Re-sealing is faster and cheaper than a full local probate; (3) FULL LOCAL PROBATE IN NON-COMMONWEALTH COUNTRIES: for assets in EU countries, the US, or other jurisdictions, a full local succession process is typically required alongside (or instead of) the UK process. EU Succession Regulation (EU Regulation 650/2012) applies in EU member states — it allows a European Certificate of Succession to be issued by the country of habitual residence. However, since Brexit, the UK no longer participates in EU 650/2012, so UK executors must navigate the local law of each EU country separately; (4) MOVABLE VS IMMOVABLE ASSETS: as a general private international law rule: immovable property (land) is governed by the law of the country where it is situated (lex situs). The succession to French land follows French law; the succession to Spanish property follows Spanish law — regardless of where the deceased was domiciled. Movable property (bank accounts; shares; personal property) is generally governed by the law of the deceased's domicile; (5) PRACTICAL STEPS FOR CROSS-BORDER ESTATES: (a) Instruct local lawyers in each country with assets; (b) Identify whether re-sealing or local probate is required; (c) Obtain death certificate translations (official, apostilled); (d) Complete foreign IHT/succession tax filings; (e) Claim UK IHT double tax relief for any foreign tax paid; (f) Allow 12-24 months for complex multi-jurisdiction estates.

Receiving an inheritance — whether from the UK or abroad — is generally not subject to income tax or capital gains tax in the beneficiary's hands at the point of receipt: (1) NO INCOME TAX ON RECEIPT OF INHERITANCE: an inheritance is not income. Whether received in cash, property, or other assets, the beneficiary does not pay UK income tax when they receive an inheritance. This applies to inheritances from overseas estates just as much as UK estates; (2) NO CGT ON RECEIPT OF INHERITANCE: there is no CGT charge when a beneficiary receives assets as part of an inheritance. The beneficiary's CGT base cost is the market value of the asset at the date of death of the deceased (the probate value) — not the deceased's original acquisition cost; (3) INCOME AND GAINS AFTER INHERITANCE ARE TAXABLE: from the point of receipt, any income generated by inherited assets (rental income; dividend income; interest) is subject to normal UK income tax. Any capital gain arising on the subsequent sale of inherited assets is subject to CGT — measured from the probate value (the base cost), not from the original acquisition cost; (4) FOREIGN INCOME TAX ON OVERSEAS ASSETS: if the inherited overseas assets generate income (foreign rental income; foreign dividends), UK income tax applies on a UK-resident beneficiary's worldwide income. The UK offers credit for foreign income tax paid to avoid double taxation; (5) HMRC REPORTING: if you receive a significant overseas inheritance, consider: (a) Whether the estate has met its own IHT/foreign tax obligations (non-compliance can create complications for the beneficiary); (b) Whether any trust structures (where the deceased was a settlor) create ongoing UK tax reporting obligations (particularly for UK beneficiaries of offshore trusts — strict anti-avoidance rules apply); (c) Consulting a tax adviser if the inheritance involves complex structures, offshore trusts, or assets generating significant income.