Receiving an inheritance from abroad

Find out about the rules and potential tax consequences of receiving inheritance from abroad.

What happens if I receive an inheritance from abroad?

If you receive an inheritance from abroad, there may be tax consequences for you in the UK. You might need to pay inheritance tax on the money - even if it’s coming from another country.

Inheritance tax is usually a one-off tax payment, due from the estate of the person who has died. It is payable to HMRC, and may be due on money you’ve received from another country. Inheritance tax is potentially payable on all assets within the estate, and may also be due on gifts made during the deceased’s lifetime.

When is inheritance tax due on an inheritance from abroad?

If you have received an inheritance from abroad, you might need to pay inheritance tax in the UK if:

  • The person who died was ‘domiciled’ (permanently living) in the UK
  • The person who died left you assets within the UK (such as property).

If you have any concerns about the tax consequences of receiving an inheritance from a different country, it is best to take expert advice at an early stage.  An inheritance tax solicitor can tell you if either of the points above apply in your situation.

Domicile rules in the UK

If someone dies whilst ‘domiciled’ in the UK, inheritance tax may be payable on their estate – even if they were living in a different country at the time of their death.

If someone was permanently living in the UK at the time of their death they are considered ‘domiciled’ in the UK. The definition is partly dependent on whether someone who moved abroad, changed their ‘domicile’ (permanent home) or their ‘residence’ (where they live). You can only have one domicile.

HMRC considers people domiciled in the UK if:

  • They lived in the UK for 15 of the last 20 years
  • Their permanent home was in the UK at any time in the last 3 years of their life.

Although someone may be ‘living abroad’ at the time of their death, they might be domiciled in the UK under the above rules. This means that inheritance tax may be due, and payable to HMRC, on their assets.

Which country’s inheritance tax rules apply if someone dies whilst living abroad?

Generally speaking, the inheritance tax rules of whichever country the deceased was domiciled in will apply after their death but if the deceased owned property abroad, there may also be inheritance tax (or its local equivalent) to pay in the country where the property is situated. When someone is domiciled in the UK, their assets are subject to UK inheritance rules after their death.

Note: even if the deceased was domiciled abroad, inheritance tax may still be payable in the UK on their UK assets (e.g. property).

Double taxation on an inheritance from abroad

Other countries have their own rules relating to inheritance tax (or their equivalent).  There is a risk that taxation could be ‘duplicated’. This is called ‘double taxation’. 

In cases of double taxation, the country that the deceased lived in and the country they were born may both levy inheritance tax on the estate. In a situation like this, the value of the estate may be significantly reduced. This could mean that beneficiaries in the Will receive less than the deceased intended.

Fortunately, HMRC has ‘bilateral treaties’ with some countries (including Ireland and the USA) to help mitigate this situation.

Sorting out tax if you are moving abroad

If someone is considering moving abroad, perhaps to retire, they should seriously consider – before they move – some of these issues. For example, the double taxation may be avoided by changing your domiciled status. But beware, if you’re married the rules relating to ‘gifts’ are more complicated if you are domiciled in different countries.

It is advisable, before you move abroad, to consider your Will. You may want to consider setting up two separate Wills. One Will would cover your UK assets and the other would address the assets of the country in which you are domiciled. 

Inheritance tax solicitors and advice

Tees has specialist inheritance tax solicitors who can help you:

•    If you are moving abroad and need to write or change your Will
•    If you have received an inheritance from abroad and need advice about the tax implications
•    If you have received an inheritance from abroad and there was no Will in place.

Call us on 0800 013 1165 or contact our inheritance tax team online  if you need advice about an overseas inheritance tax issue

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