Receiving Inheritance from Overseas: UK Tax Rules Explained

In an increasingly globalised world, it’s becoming more common for UK residents to find themselves receiving inheritance from overseas when relatives or loved ones pass away while living abroad. While this may bring financial benefit, it also raises important considerations when it comes to UK tax. At Blacktower Financial Management, we support clients in navigating the complexities of cross-border financial matters with clarity and care.

Does the UK Tax Overseas Inheritance?

Whether inheritance from abroad is taxed in the UK depends primarily on domicile, not residency or where the assets are located. If you are UK-domiciled, HMRC may assess your worldwide assets—including any inheritance received from overseas—when calculating Inheritance Tax (IHT).

However, if the person who left you the inheritance was not domiciled in the UK, and the assets were located abroad, it is generally outside the scope of UK IHT. Instead, the inheritance may be subject to local tax rules in the country where the deceased lived or held assets.

Who Pays Inheritance Tax?

UK IHT is usually paid by the estate of the deceased, not the individual receiving the inheritance. It applies at a rate of 40% on estates above the £325,000 threshold, unless specific exemptions or reliefs apply.

You may need to take further action if:

• The estate is liable for IHT and you are named as a beneficiary.
• You received a significant gift from the deceased in the seven years prior to their passing.
• The inherited assets generate income or are later sold at a gain.

What Other UK Taxes Might Apply?

Even when IHT does not apply, other UK taxes may become relevant once the inheritance is received:

• Income Tax – If the inherited assets produce income, such as rent or dividends, you may need to declare this on your Self Assessment.
• Capital Gains Tax (CGT) – You could be liable for CGT if you dispose of inherited property, shares, or other assets and realise a gain based on their value at the time of inheritance.

Do I Need to Tell HMRC?

You are not automatically required to report an overseas inheritance to HMRC unless:

• It results in taxable income or capital gains.
• You receive a large amount of money—typically £100,000 or more—which may prompt scrutiny under anti-money laundering regulations.
• HMRC requests disclosure through a tax return or enquiry.

That said, keeping thorough records of where the funds originated can help to streamline any necessary reporting or bank transfers.

What About Double Taxation?

If tax has already been paid on the inheritance in another country, the UK’s double taxation treaties may help you avoid being taxed twice. These treaties vary depending on the country involved and can help to reduce or offset UK tax liabilities in some circumstances.

It can be helpful to work with a professional who understands both local and international tax frameworks to help you identify any potential reliefs and avoid complications.

How Blacktower Can Support You

With nearly four decades of experience and offices across key international locations, including the UK, Portugal, and the Middle East, Blacktower Financial Management is well placed to assist clients with cross-border financial considerations.

We can help you:

• Understand how your inheritance may be treated under UK tax law.
• Collaborate with international professionals where necessary.
• Navigate reporting requirements and facilitate the smooth transfer of funds.
• Develop a long-term strategy for managing inherited assets effectively.

We take a personalised, professional approach to each client’s circumstances, offering clarity around your options and helping you move forward with confidence.

Getting Help Receiving Inheritance from Overseas

Receiving an inheritance from abroad can be a valuable opportunity, but it often comes with layers of legal, tax, and financial complexity. Speaking to a qualified tax professional is essential to understand your obligations—both in the UK and in the country of origin—and to avoid any unexpected liabilities.

At Blacktower Financial Management, we work alongside international tax professionals and legal contacts to help facilitate the smooth transition of overseas assets. Once received, our team can support you with tailored estate and financial planning strategies, helping you make the most of your inheritance.

Whether you’re looking to grow your wealth through sound investment opportunities, structure your finances for future generations, or simply gain clarity around your options, we provide the knowledge and support to move forward with purpose.

If you’re aware that you may be receiving an inheritance in the future, it’s also beneficial to plan ahead. Preparing in advance can help you optimise your financial position, mitigate potential tax implications, and put you in the best place to make informed, strategic decisions when the time comes.

By aligning your inheritance with your broader financial goals, we can help turn a one-time windfall into a lasting advantage. Speak to Blacktower’s UK team today to find out how we can support you with international estate matters.

Sources

• HM Revenue & Customs (HMRC) – Inheritance Tax: Overview
• HMRC – Residence, Domicile and the Remittance Basis: RDR1 Guidance Note
• Gov.uk – Capital Gains Tax: What You Pay It On
• Gov.uk – Tax on Foreign Income
• Double Taxation Treaties – HMRC International Manual