The Ultimate Guide to UK Estate Tax for Non-Residents

If you’re not living in the UK but own property or other assets there, it’s important to know how Inheritance Tax (IHT) might affect you. The UK’s estate tax rules can have a big impact on what happens to your assets when you pass away. Understanding how it works can help you plan ahead and protect your wealth.

What is UK Estate Tax?

UK estate tax, or Inheritance Tax, is a levy on the value of a deceased person’s estate, which includes property, money, and possessions. The standard IHT rate is 40%, applied to the value of the estate exceeding the nil-rate band (currently £325,000 for the 2023/24 tax year).

Non-residents may also be subject to UK estate tax if they hold assets located within the country. Get support with Inheritance Tax Planning with Haggards Crowther.

When Does UK Estate Tax Apply to Non-Residents?

Non-residents are liable for UK estate tax if they own UK-based assets, regardless of their citizenship or residency status. These assets include:

Residential Property: Houses or apartments in the UK.
Business Assets: Shares in UK companies.
Cash and Investments: Funds held in UK bank accounts or investment portfolios.

However, non-residents are not taxed on their global assets unless they are deemed domiciled in the UK.

What is a Deemed Domicile?

Deemed domicile applies to individuals who:

Have been UK residents for at least 15 of the last 20 tax years.
Were domiciled in the UK at any time in the past three years before their death.

If deemed domiciled, your worldwide estate may be subject to UK estate tax.

Exemptions and Reliefs

There are several exemptions and reliefs that non-residents can utilise:

Spousal Exemption: Transfers to a UK-domiciled spouse are tax-free. Transfers to a non-UK-domiciled spouse are exempt up to £325,000.
Charitable Donations: Gifts to UK-registered charities are exempt from IHT.
Business Relief: Certain business assets may qualify for reduced IHT rates.

How to Reduce UK Estate Tax

Non-residents can use several strategies to reduce their estate tax liabilities:

Annual Exemption: Gifts of up to £3,000 per year are exempt from IHT.
Establish Trusts: Transferring assets into a trust can protect them from future IHT.
Joint Ownership: Owning property as joint tenants can limit the taxable value of your estate.

Double Tax Treaties

The UK has tax agreements called double taxation treaties with many countries to make sure you’re not taxed twice on the same assets. These treaties help decide which country has the right to tax your estate and can sometimes reduce your bill if you’ve already paid inheritance or estate tax elsewhere.

In most cases, you can also claim relief or credits for tax already paid abroad. This can significantly reduce the total tax owed and is a key part of smart estate planning.

Seeking Professional Advice with Haggards Crowther

UK estate tax can be complex, especially if you’re based overseas. Our tax specialists and estate planners at Haggards Crowther are here to help you navigate the rules and structure your estate effectively and compliantly.

We’ve helped many clients manage their income, tax, and estate plans—so they can enjoy more of what they earn and pass it on confidently to the next generation.

Terry Smith

Terry started life at HM Revenue and Customs before moving to Ashdens and then on to BDO and Chantrey Vellacott, the combination of which has provided Terry with a wide breadth of experience which has proved invaluable when helping a broad range of clients with their tax affairs.

Whether it involves meticulously organising a client’s tax affairs or leveraging his expertise to mitigate their tax exposure, Terry has a passion for delivering tangible results.