Do I pay UK tax on an inheritance from abroad

Q: How does this work in practice?

Illustration only. Maria lives in Manchester and is UK resident. Her father lived his whole life in Country X and has never been UK resident. He dies and leaves her a flat in Country X worth £200,000 and a local bank account of £40,000. Inheritance tax. None in the UK. Her father was not a long term UK resident and the assets are outside the UK. Any Country X inheritance tax is a matter for its own rules. Income tax. Maria lets the flat. The rent and the bank interest are foreign income on her Self Assessment return, with credit for any Country X tax on the same income. Capital Gains Tax. She sells the flat later for the equivalent of £230,000. Her gain starts from the £200,000 value at death, less allowable costs, with relief for any Country X tax on the same gain. Change one fact: her father had lived in the UK for 25 years and retired abroad four years before he died. He would still be a long term UK resident, so his worldwide estate, including the flat, would be within UK inheritance tax at 40% above the available threshold.

You do not pay UK tax simply for receiving an inheritance from someone who lived and died abroad. UK inheritance tax depends on the person who died: if they were not a long term UK resident, only their UK assets are taxed. Once the assets are yours, a UK resident pays UK income tax on what they earn and Capital Gains Tax on any rise in value after the date of death.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

Does UK inheritance tax apply when someone abroad dies?

Only to a limited extent. Since 6 April 2025 the question is whether the person who died was a long term UK resident. Under section 6A of the Inheritance Tax Act 1984 that means UK resident for at least 10 of the 20 tax years before the tax year of death. GOV.UK puts it simply: if the person was based abroad, inheritance tax is only paid on their UK assets, such as UK property or bank accounts, and they are treated as based abroad if they lived in the UK for less than 10 of the last 20 years.

Some UK assets are also outside the charge for someone based abroad. GOV.UK lists foreign currency accounts with a bank or the Post Office, overseas pensions and holdings in authorised unit trusts and open ended investment companies. These are explained in excluded property for inheritance tax.

Your own residence is not part of this test. A UK resident who inherits a house in Portugal from a parent who never lived in the UK has no UK inheritance tax to pay on it, because the parent’s foreign assets were never in scope.

For deaths on or before 5 April 2025 the older rules apply: the deceased was treated as based in the UK if their domicile was in the UK, if they had lived in the UK for 15 of the last 20 years, or if they had a UK domicile at any time in the last three years of life.

What if the person used to live in the UK?

This is where heirs are most often caught out. Someone who was long term UK resident stays in scope for a period after they leave. HMRC’s manual at IHTM47020 sets out the tail: a person with 10 to 13 years of UK residence stays in scope for 3 tax years after leaving, rising by one year for each extra year of residence to a maximum of 10 tax years for someone resident in all 20 years. HMRC’s own example is Dexter, who lived in the UK for 30 years and emigrated to Canada; he remains in scope for 10 years.

If the deceased was still a long term UK resident at death, their worldwide estate is within UK inheritance tax, including the foreign assets you inherit. The executors deal with the tax, but GOV.UK notes that HMRC will contact a beneficiary if the personal representative could not or did not pay before handing over the inheritance. The detail is covered in long term residence and inheritance tax, and the position of an estate with only UK assets in inheritance tax for non residents with UK assets.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

Do I pay income tax on what I inherit?

Not on the inheritance itself. GOV.UK says you do not usually owe any tax on an inheritance at the time you inherit it. Income tax applies to what the inherited assets produce afterwards.

If you are UK resident you normally pay UK tax on foreign income, including interest, dividends, rent from overseas property and income from overseas pensions. You usually report it on a Self Assessment return, as explained in declaring foreign income. If the other country has already taxed the income, you can usually claim Foreign Tax Credit Relief, although the credit may be limited by the double taxation agreement or by the UK tax on that income.

New arrivals have a possible exception. From 6 April 2025, individuals who come to the UK after at least 10 consecutive tax years of non residence can claim relief on foreign income and gains arising in their first 4 years of UK residence. The relief has to be claimed; see the foreign income and gains regime.

What Capital Gains Tax do I pay when I sell?

Section 62 of the Taxation of Chargeable Gains Act 1992 treats the deceased’s assets as acquired by the personal representatives or beneficiaries at their market value at the date of death, and the death itself is not a disposal. So when you sell, your gain is measured from the value at death, not from what the deceased originally paid. GOV.UK confirms you pay Capital Gains Tax if you sell inherited shares that went up in value since the person died.

UK residents pay Capital Gains Tax on both UK and foreign gains. For property abroad, GOV.UK explains that you will usually pay tax in both countries and get relief from the UK for the foreign tax. If inheriting a home means you now own two, you must tell HMRC which is your main home within two years. Selling overseas property is covered in more detail in selling property abroad.

What if the other country taxes the estate as well?

Many countries charge their own estate or inheritance taxes, and those are dealt with under that country’s rules. Double taxation only becomes a UK question if UK inheritance tax is also charged on the same assets, typically because the deceased was still a long term UK resident. GOV.UK notes that executors may be able to reclaim tax under a double taxation treaty in that case. The UK has 10 inheritance tax treaties, and unilateral relief covers other countries; see double taxation relief for inheritance tax.

How does this work in practice?

Illustration only. Maria lives in Manchester and is UK resident. Her father lived his whole life in Country X and has never been UK resident. He dies and leaves her a flat in Country X worth £200,000 and a local bank account of £40,000.

Inheritance tax. None in the UK. Her father was not a long term UK resident and the assets are outside the UK. Any Country X inheritance tax is a matter for its own rules.
Income tax. Maria lets the flat. The rent and the bank interest are foreign income on her Self Assessment return, with credit for any Country X tax on the same income.
Capital Gains Tax. She sells the flat later for the equivalent of £230,000. Her gain starts from the £200,000 value at death, less allowable costs, with relief for any Country X tax on the same gain.

Change one fact: her father had lived in the UK for 25 years and retired abroad four years before he died. He would still be a long term UK resident, so his worldwide estate, including the flat, would be within UK inheritance tax at 40% above the available threshold.

What about gifts from relatives abroad?

The same principle applies to lifetime gifts. A gift of foreign assets by someone who is not a long term UK resident is outside UK inheritance tax. If the giver was in scope, the gift is usually a potentially exempt transfer, and GOV.UK explains that recipients may have to pay inheritance tax if the giver gives away more than £325,000 and dies within seven years. See also money received as a gift or inheritance.

What mistakes come up?

Assuming that because you live in the UK, your inheritance is taxed here. The deceased’s status decides inheritance tax.
Missing the tail. A parent who left the UK a few years ago may still be in scope.
Using the deceased’s original cost when working out a gain, rather than the value at death.
Forgetting to report rent or interest from inherited foreign assets.
Applying the post April 2025 test to an earlier death, where domicile still decides the position.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.