Overseas Inheritance Tax Calculator for UK Residents

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Foreign Inheritance Tax Calculator for UK Residents

From 6 April 2025, UK Inheritance Tax depends on your residence status. If you’ve been UK-resident for 10 of the last 20 years, your worldwide assets (including foreign inheritance) may be subject to UK IHT at 40% above the £325,000 threshold.

Your Calculation Results

£0
Estimated UK Inheritance Tax Liability
Total Estate Value: £0
Total Nil-Rate Band: £0
Taxable Estate: £0
IHT Rate Applied: 40%
Tax Before Relief: £0
Your Share of Inheritance (After Tax): £0

How to Use This Calculator

This calculator helps UK residents estimate their potential Inheritance Tax liability when receiving assets from abroad. Here’s what you need to do:

  1. Enter the inheritance value: Input the total value of foreign assets you’re receiving in pounds sterling. If the inheritance is in foreign currency, convert it using the exchange rate on the date of death.
  2. Specify domicile status: The deceased’s domicile determines which assets fall under UK IHT. UK domicile means worldwide assets are taxable, whilst non-UK domicile typically means only UK-sited assets are taxable.
  3. Confirm your residence status: From April 2025, long-term residents (10+ years in the UK out of the last 20) face IHT on worldwide assets. Short-term residents generally only face IHT on UK assets.
  4. Identify asset location: Where the assets are physically located matters. UK property is always within scope, whilst foreign assets depend on domicile and residence rules.
  5. Calculate total estate value: IHT is calculated on the entire estate, not just your portion. Include all assets owned by the deceased at death.
  6. Apply available reliefs: The nil-rate band (£325,000) and residence nil-rate band (up to £175,000) reduce the taxable amount. Transferable allowances from a deceased spouse can double these.
  7. Account for foreign tax: If tax was paid abroad, you may claim relief through Double Taxation Agreements or Unilateral Relief to avoid paying twice.

What Affects Your UK Inheritance Tax on Foreign Assets?

The New Residence-Based System (2025)

Since 6 April 2025, the UK replaced domicile-based IHT with a residence-based system. You’re now classified as a long-term resident if you’ve been UK-resident for at least 10 of the previous 20 tax years. This status subjects your worldwide estate to UK IHT, including foreign property, overseas bank accounts, and international investments.

If you’ve been resident for fewer than 10 years, you’re only liable for IHT on UK-sited assets. This creates a clear threshold that’s easier to track than the old domicile rules.

Double Taxation Relief

When you inherit from a country that also charges estate or inheritance tax, you could face double taxation. The UK has Double Taxation Agreements with countries including the United States, France, Italy, Ireland, India, Netherlands, South Africa, Sweden, and Switzerland.

These treaties typically allow tax paid overseas to be credited against your UK IHT bill. If there’s no treaty in place, you may still claim Unilateral Relief, where HMRC provides credit based on a proportional formula.

Exemptions and Allowances

Several exemptions can reduce or eliminate your IHT liability. Inheritances to spouses or civil partners are entirely exempt, regardless of value. Gifts to UK-registered charities are also exempt. Additionally, estates valued below the combined nil-rate bands (£325,000 standard, plus up to £175,000 residence allowance) typically owe no tax.

When Assets Are Outside UK IHT Scope

If the deceased was not UK-domiciled and you’re receiving foreign-sited assets, these usually fall outside UK IHT scope. However, any UK assets (such as UK property or UK bank accounts) remain taxable regardless of the deceased’s domicile.

Scenarios: Who Pays What?

Scenario UK IHT Liability Explanation
UK long-term resident inherits £500,000 from Spain Likely taxable Long-term residents face IHT on worldwide assets. Tax due on amount above nil-rate band at 40%.
Recent UK immigrant (3 years) inherits foreign property Not taxable Short-term residents only pay IHT on UK-sited assets. Foreign property is excluded.
Inheriting from non-domiciled parent abroad Depends on asset location If assets are abroad and deceased wasn’t UK-domiciled, typically no UK IHT. UK assets always taxable.
Spouse inherits £2 million estate from UK-domiciled partner Exempt Spousal exemption applies regardless of amount. Unused nil-rate band transfers to surviving spouse.
French villa worth £800,000, French tax paid Reduced via treaty UK-France DTA allows credit for French tax paid, reducing or eliminating UK IHT liability.
Charity receives 10% of £1 million estate 36% rate applies Charitable donations of 10%+ reduce IHT rate from 40% to 36% on remaining taxable estate.

Frequently Asked Questions

Do I personally pay inheritance tax when I receive money from abroad?
No, IHT is paid by the estate of the deceased, not by you as the beneficiary. However, you might face Income Tax on earnings from inherited assets (like rental income) or Capital Gains Tax if you later sell inherited property at a profit. The executor handles IHT payment before distributing inheritance to beneficiaries.
How do I know if the deceased was UK-domiciled?
Domicile is about permanent home, not just residence. Someone is typically UK-domiciled if they were born in the UK and never permanently relocated abroad with intention to stay. From 2025, the “deemed domicile” rule means anyone resident in the UK for 15 of the last 20 years is treated as UK-domiciled for IHT purposes. However, the new long-term residence rules (10 of 20 years) now largely replace domicile considerations.
What happens if I inherit property in a foreign currency?
You must convert the value to pounds sterling using the exchange rate on the date of death. This establishes the base value for IHT calculations and also sets your base cost for any future Capital Gains Tax if you sell the asset. Keep records of the exchange rate used and the source.
Can I claim relief if both countries tax the same inheritance?
Yes. If the UK has a Double Taxation Agreement with the other country, you can claim credit for foreign tax paid against your UK IHT liability. If there’s no treaty, Unilateral Relief may still be available through HMRC. You’ll need proof of foreign tax paid and should complete the appropriate sections on form IHT400.
Do I need to report foreign inheritance to HMRC?
You must report it if the estate is liable for UK IHT. Use form IHT400 within 12 months of death. If the deceased was domiciled outside the UK, also complete Schedule IHT401. Even if no IHT is due, large transfers (£100,000+) may trigger bank reporting requirements under anti-money laundering rules. Keep documentation showing the inheritance source.
What if I received gifts from the deceased before they died?
Gifts made within seven years of death may be subject to IHT. Small gifts (annual exemption of £3,000, plus small gifts of £250 per person) are typically exempt. Larger gifts use a sliding scale: 0-3 years before death face full 40% rate, whilst gifts 3-7 years before death receive taper relief reducing the rate progressively. Complete Schedule IHT403 if applicable.
How does the residence nil-rate band work for foreign property?
The residence nil-rate band (up to £175,000) applies when a main residence is left to direct descendants (children, grandchildren). This works for both UK and foreign property, as long as it was the deceased’s main home. Combined with the standard nil-rate band, a couple can potentially pass up to £1 million tax-free to their children.
What counts as a ‘long-term resident’ under the new 2025 rules?
You’re a long-term resident if you’ve been UK tax resident for at least 10 of the 20 tax years immediately before the tax year of death (or other chargeable event). This replaced the old domicile system. Long-term residents face UK IHT on their worldwide assets, whilst short-term residents only face IHT on UK assets.

Common Mistakes to Avoid

Assuming No Tax is Due Because Assets Are Abroad

Many people wrongly believe that foreign assets automatically escape UK IHT. If you’re a long-term UK resident or the deceased was UK-domiciled, worldwide assets generally fall within scope. Always check your residence status before assuming exemption.

Missing the 12-Month Reporting Deadline

Form IHT400 must reach HMRC within 12 months from the end of the month of death. Missing this deadline without reasonable excuse triggers penalties up to £200, with additional penalties up to £3,000 if you’re more than two years late. Apply for your Inheritance Tax reference number at least three weeks before submitting forms.

Forgetting to Claim Double Taxation Relief

If you’ve paid tax abroad, don’t leave money on the table. Many beneficiaries forget to claim relief for foreign tax already paid. Gather all foreign tax payment receipts and complete the relevant sections of your IHT return to reduce your UK liability.

Not Keeping Currency Conversion Records

You’ll need to prove the sterling value of foreign assets on the date of death. Without proper documentation of exchange rates used, HMRC may challenge your valuations. Keep records of the source and date of any conversion rates applied.

Overlooking Transferable Nil-Rate Bands

If the deceased’s spouse or civil partner died before them without using their full nil-rate band, the unused portion transfers over. This could double your allowance to £650,000. Check whether a claim for transferable nil-rate band should be made.

What Happens After You Receive Foreign Inheritance?

Transferring Money to the UK

Once inheritance is released, you’ll need to transfer funds to your UK account. Banks typically charge poor exchange rates and high international transfer fees. Specialist transfer services often offer better rates and lower costs, especially for large amounts. Compare the mid-market rate against what your provider offers.

Ongoing Tax Obligations

Receiving inheritance doesn’t end your tax responsibilities. If inherited assets generate income (rent, dividends, interest), you must declare this on your Self Assessment tax return. You’ll pay Income Tax at your marginal rate on this income.

If you later sell inherited property or investments, Capital Gains Tax may apply. Your base cost is the market value at the date of death, not what the deceased originally paid. Keep valuation records to calculate any future gains accurately.

Estate Administration Timeline

International estates take longer to administer than purely domestic ones. Expect 6-18 months or more, depending on complexity. You may need to obtain probate (or its equivalent) in multiple countries. Some jurisdictions require local legal representation before releasing assets.

When to Seek Professional Advice

Cross-border inheritance involves multiple legal systems and tax regimes. Consider professional help if your inheritance exceeds £100,000, involves property abroad, includes complex assets like businesses or trusts, or if tax was paid in another country. A specialist can identify reliefs you might miss and help you avoid costly errors.

References

HM Revenue & Customs (2025). Inheritance Tax: Overview. GOV.UK. Available at: https://www.gov.uk/inheritance-tax

HM Revenue & Customs (2025). Inheritance Tax if you’re a long-term UK resident. GOV.UK. Available at: https://www.gov.uk/guidance/inheritance-tax-if-youre-a-long-term-uk-resident

HM Revenue & Customs (2025). Double Taxation Treaties. HMRC International Manual. Available at: https://www.gov.uk/government/collections/inheritance-tax-double-taxation-treaties

HM Revenue & Customs (2024). Inheritance Tax Account (IHT400). GOV.UK Forms and Guidance.

The Tax Adviser (2025). The scope of inheritance tax: a new residence-based system. Tax Adviser Magazine.

GOV.UK (2025). Capital Gains Tax: What You Pay It On. Available at: https://www.gov.uk/capital-gains-tax

GOV.UK (2025). Tax on Foreign Income. Available at: https://www.gov.uk/tax-foreign-income

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