UK Inheritance Tax on Foreign Property

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Taxes have an important place in the UK. Therefore, if you intend to live or invest in this country, you must know about the tax system. One of the situations where the tax is in question is the inheritance from abroad. In this article, we explained the UK Inheritance Tax on Foreign Property in detail.

Property located abroad is not subject to inheritance tax (IHT) where the property in question is owned by non-UK residents. Such properties are called excluded properties.

If you are a UK resident, you must declare any foreign assets and income in the "foreign section" of your self-assessment tax return (You are considered a resident if you stay in the UK for 183 days or more between April 6 and April 5 each tax year). If you are a non-domiciled residence, you do not have to pay taxes in the UK. When your domicile is abroad, Inheritance Tax is only paid on your UK assets. However, you do not have to pay this tax on your foreign currency accounts with a bank or the Post Office, overseas pensions, or holdings in authorized unit trusts and open-ended investment companies.

You must pay UK income tax on rental income from overseas property. If you have leased property, the income from tenants will be added to your total earnings for that year and could put you in a higher tax bracket. If you sell your property, it may be subject to capital gains tax in the UK. If the property offshore is real estate, that property may be subject to a mortgage.

In the event of death, foreign assets will be added to the value of your property and may be subject to UK inheritance tax.

On death, the inheritance tax liability attributed to the property (payable by the person who inherited the property; not a death-related expense) is reduced, and non-UK residents (subject to inheritance tax only on UK situs assets) cannot reduce their estate by such overseas incurred liabilities. Expenses incurred in the overseas property administration up to 5% of the property's market value can be deducted in calculating the property's value.

If UK residents own property outside of the UK, they can request a fee equivalent to the local inheritance tax in the country where the property is located. If there is not any exemption, the double tax must be paid.

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