Inheriting Money from Abroad: UK Tax Rules Explained

Receiving an inheritance from overseas sounds like a straightforward windfall. In practice, UK tax rules — particularly around domicile, long-term resident status, the post-2025 Foreign Income and Gains (FIG) regime, and double tax treaties — can make an overseas inheritance significantly more complex than a domestic one.

Whether you are a UK expat living abroad, a recently arrived UK resident within the 4-year FIG window, or a UK-domiciled individual with family ties overseas, understanding the rules before you inherit could save a substantial amount of tax.

The Domicile Question: Why It Matters Above Everything Else

Domicile is the single most important concept in UK inheritance tax (IHT). It is distinct from residence and nationality — it is broadly the country you consider your permanent home, and it tends to follow you through life until you actively, genuinely change it.

Important change from 6 April 2025: The old "deemed domicile" rule (which caught individuals who had been UK-resident for 15 of the preceding 20 tax years) was abolished when the non-domicile regime was reformed. IHT now uses a residence-based test instead: from 6 April 2025, a person becomes a "long-term UK resident" (LTR) for IHT purposes if they have been UK-resident for at least 10 of the preceding 20 tax years. Once LTR status is acquired, worldwide assets are within the scope of UK IHT — regardless of domicile in the traditional sense. LTR status "tails off" gradually once a person leaves the UK permanently, but this takes a number of years.

If you are UK-domiciled or have acquired LTR status, HMRC treats your entire worldwide estate as subject to UK IHT at 40% above the nil-rate band. This means that if you inherit assets from abroad, those assets will eventually be included in your own estate for UK IHT purposes when you die — even if the money never touches the UK.

Critically, the inheritance you receive is not itself subject to UK IHT when you receive it. IHT is a tax on the deceased's estate, not on the beneficiary. However, the inherited funds then become part of your estate, and if you are UK-domiciled or LTR, they will be taxed at 40% when you die.

If you are non-UK domiciled and have not acquired LTR status, HMRC only subjects your UK-sited assets to IHT. Assets you inherit that remain overseas are outside the UK IHT net — provided your domicile and residency position is properly established.

Inheritance Tax on the Deceased's Estate

Before the funds reach you, the deceased's estate in the country of origin may face its own succession or inheritance tax. Germany, France, Japan, and the United States all have significant inheritance or estate taxes. The rates and exemptions vary enormously.

The UK has double tax treaties on inheritance tax with a small number of countries — including the United States, France, India, Ireland, Italy, the Netherlands, South Africa, Sweden, and Switzerland (as of 2026, though this list changes; verify current position with a tax adviser). These treaties may reduce or eliminate double taxation where both the UK and the overseas country seek to tax the same assets.

Where no treaty exists, HMRC may offer unilateral double tax relief: if overseas inheritance tax has been paid on assets that are also within the scope of UK IHT (because you are UK-domiciled), the UK will credit the overseas tax paid against the UK IHT liability. This prevents full double taxation but is not always a complete solution, particularly where rates differ.

The Foreign Income & Gains (FIG) Regime and Overseas Inheritances

Note on the 2025 non-dom reform: The remittance basis for non-domiciled individuals was abolished from 6 April 2025. It has been replaced by the 4-year Foreign Income and Gains (FIG) regime, which is available to individuals who have not been UK-resident in any of the 10 tax years preceding their arrival in the UK. Under the FIG regime, eligible new arrivals pay no UK tax on foreign income and gains for their first four years of UK residence — regardless of whether they bring funds to the UK. After four years, worldwide income and gains are taxable on the arising basis in the normal way.

If you arrived in the UK before 6 April 2021 (and were not a new arriver), you were subject to the old remittance basis rules while they applied, and transitional provisions (including the Temporary Repatriation Facility, which allowed pre-April 2025 foreign income and gains to be remitted to the UK at reduced rates in 2025/26 and 2026/27) may be relevant to funds already held offshore.

A pure inheritance of capital from a deceased estate is not income or a capital gain — it is a capital receipt — and is not taxable on receipt either under the old or new regime.

However, complications arise if:

• The inherited assets include accrued income or gains. If you inherit a portfolio of investments with embedded capital gains, and you sell those investments while they are offshore, the gains realised may constitute foreign chargeable gains. Under the FIG regime (if you are eligible), these may be sheltered for up to four years. Outside the FIG window, they are taxable on the arising basis.
• The inheritance includes offshore income-producing assets. Rental income, dividends, or interest generated by inherited overseas assets after you receive them will be foreign income, taxable in the UK unless covered by the FIG regime.
• Mixed fund rules — historical context. Under the old remittance basis, "mixed funds" (where clean capital became mixed with income or gains in the same account) attracted a complex HMRC ordering rule. Those rules remain relevant to pre-April 2025 funds held offshore by former remittance basis users. For new arrivers using the FIG regime, the distinction between clean capital and foreign income/gains still matters for the period after the FIG window closes. Keeping inherited capital separate from income and gains accounts remains advisable.

Declaring Overseas Inheritances to HMRC

There is no automatic obligation to declare an overseas inheritance to HMRC simply because you received it — a pure capital receipt is not taxable income.

However, you must declare:

• Any income or gains arising from the inherited assets — on your Self-Assessment return, via the SA106 (Foreign) pages.
• If the assets form part of a dutiable estate in the UK — the executors file an IHT return (IHT400) and the beneficiary may need to liaise with the estate's tax advisers.
• If you hold pre-April 2025 foreign income or gains offshore that were previously sheltered under the old remittance basis — careful analysis of the Temporary Repatriation Facility (TRF) and the arising basis rules is required before any funds are transferred to the UK.

Additionally, the Common Reporting Standard (CRS) means that HMRC will receive information from overseas financial institutions about accounts you hold and funds received. If an overseas inheritance sits in a foreign bank account, HMRC is likely to receive a report about it. Ensuring your UK tax returns accurately reflect your position is therefore not merely good practice — it is essential.

Practical Steps When You Receive an Overseas Inheritance

Step one: Establish the domicile and residency position. Your domicile status and whether you have acquired long-term UK resident (LTR) status (10 of the preceding 20 tax years UK-resident) jointly determine whether the inherited funds will be subject to UK IHT in your own estate. If your position is uncertain or you are approaching the 10-year LTR threshold, take advice before the funds arrive.

Step two: Identify the nature of the assets. Distinguish between the pure capital element (no tax trigger in the UK) and any embedded income or gains (potentially taxable). This is particularly important for inherited investment portfolios.

Step three: Keep the inherited funds clean. Open a separate account for the inherited funds if possible. Do not mix clean capital with income or gains — this simplifies the tax analysis and preserves the clean capital status of the inheritance.

Step four: Check for overseas tax paid. Document any inheritance or estate tax paid in the country of origin. This may be creditable against future UK IHT.

Step five: Consider how bringing funds to the UK is taxed. The remittance basis was abolished from 6 April 2025. If you are a new arriver within the 4-year FIG window, foreign income and gains may be sheltered. If you hold pre-April 2025 offshore funds that were previously sheltered under the remittance basis, the Temporary Repatriation Facility may allow you to remit them at a reduced rate in 2025/26 or 2026/27 — seek specialist advice before transferring any such funds. After the FIG window, foreign income and gains are taxable on the arising basis regardless of whether they are remitted.

Common Mistakes to Avoid

Many people assume that because an inheritance is "just capital," there is nothing to declare or plan around. This overlooks the fact that:

• Inheriting overseas assets that generate income or gains immediately triggers ongoing UK tax obligations (if you are UK resident).
• Failing to keep inherited funds separate from other offshore funds can complicate the tax analysis, particularly for those with pre-April 2025 foreign income or gains still held offshore.
• Assuming a double tax treaty will apply when none exists — or where the treaty only covers specific taxes — is a frequent source of unexpected liability.
• Not updating your own will and estate planning to account for the newly inherited assets, particularly if they alter your overall IHT exposure.

How Global Investments Can Help

Global Investments works with internationally mobile individuals navigating complex multi-jurisdictional tax situations. If you are expecting or have recently received an overseas inheritance, our advisers can help you understand your domicile and long-term residency position, identify any UK tax obligations arising from the inherited assets, assess the relevance of the 4-year FIG regime or transitional repatriation provisions, and plan how to structure the inherited funds in the most tax-efficient way. We work alongside specialist tax counsel in the UK and overseas jurisdictions to ensure your position is properly protected. Get in touch to arrange a confidential initial conversation.

This article is for general information only and does not constitute tax advice. Tax rules are complex, change frequently, and depend heavily on individual circumstances. Always seek professional advice before making decisions based on this content. Investments and their tax treatment can fall as well as rise in value.