Inheritance Tax On Foreign Assets
- Adil Akhtar
- Aug 12
- 18 min read
Updated: Aug 20
The Audio Summary of the Key Points of the Article:
Understanding UK Inheritance Tax on Foreign Assets – Your Starting Point
Picture this: You’ve just inherited a charming villa in Spain from a relative, or maybe your business owns shares in a US startup. Exciting, right? But then the question hits: how does UK inheritance tax (IHT) apply to these foreign assets? As a chartered accountant with over 15 years advising UK taxpayers and business owners, I’ve seen clients caught off-guard by IHT rules on overseas property. Let’s demystify this complex topic with clear, actionable steps to help you verify your tax obligations, avoid pitfalls, and plan effectively.
What Is Inheritance Tax and How Does It Apply to Foreign Assets?
Inheritance tax is a levy on the estate of someone who’s passed away, applied when the estate’s value exceeds £325,000 (the nil-rate band for 2025/26). If you’re UK-domiciled, IHT applies to your worldwide assets, including foreign property, bank accounts, or investments. Non-UK domiciled individuals only face IHT on UK-situated assets, but here’s the kicker: since April 2025, long-term UK residents (those living in the UK for 10 of the last 20 tax years) are liable for IHT on global assets for up to 10 years after leaving the UK. This shift from domicile to residence-based rules is a game-changer, per HMRC’s 2025 guidance.
The standard IHT rate is 40% on the estate’s value above the nil-rate band, though it drops to 36% if 10% or more of the net estate is left to charity. For estates including a main residence passed to direct descendants, an additional £175,000 residence nil-rate band (RNRB) can apply, potentially raising the tax-free threshold to £500,000. These thresholds are frozen until at least 2028, meaning inflation could push more estates into the IHT net.
2025/26 IHT Thresholds and Rates | Details |
Nil-Rate Band | £325,000 – No IHT on estates below this. |
Residence Nil-Rate Band (RNRB) | £175,000 – Applies if main residence is left to direct descendants, estate under £2m. |
Standard IHT Rate | 40% on value above thresholds. |
Reduced Rate (Charity) | 36% if 10%+ of net estate goes to charity. |
Long-Term Resident Rule | IHT on worldwide assets if UK resident for 10/20 years, even after leaving for up to 10 years. |
Source: HMRC IHT guidance
Why Domicile and Residence Matter So Much
None of us loves tax surprises, but I’ve seen clients trip up when they misunderstand domicile versus residence. Domicile is your permanent home, often tied to where you were born or intend to stay indefinitely. Residence is where you live for tax purposes. A client in London, originally from India, assumed his Mumbai flat was IHT-free because he hadn’t lived there in years. But as he’d been a UK resident for 18 years, HMRC deemed him a long-term resident, and the flat was taxable.
If you’re non-UK domiciled but own UK assets (like a London flat), only those are subject to IHT. However, foreign assets like overseas pensions or certain foreign currency accounts are excluded property and escape IHT for non-domiciled individuals. Be careful here: crypto assets are considered situated where you are, so holding them in a cold wallet abroad doesn’t automatically shield them from HMRC’s reach.
Step-by-Step: Checking Your IHT Liability on Foreign Assets
So, the big question on your mind might be: how do I figure out if my foreign assets are taxable? Here’s a practical guide to verify your liability, tailored for both individuals and business owners:
Determine Your Residence Status: Check if you’ve been a UK tax resident for 10 of the last 20 tax years using HMRC’s Statutory Residence Test. Access your residence history via your personal tax account.
Identify Asset Locations: List all foreign assets (e.g., property, shares, bank accounts). Note their situs – real estate is situated where the land is, shares where the company is registered.
Assess Domicile: If you’re unsure about your domicile, review factors like your permanent home, family ties, or intent to stay in the UK. HMRC’s guidance on domicile is strict, so consider professional advice.
Calculate Estate Value: Total your worldwide assets (in sterling, using exchange rates at the date of death). Deduct liabilities like mortgages, but note overseas debts only reduce the value of the specific foreign asset.
Apply Thresholds: Subtract the £325,000 nil-rate band (and £175,000 RNRB if applicable). Anything above is taxed at 40%.
Check for Excluded Property: Non-UK domiciled individuals should confirm if assets like foreign pensions qualify as excluded.
Review Double Tax Treaties: If foreign assets are taxed abroad, check for treaties with countries like the USA, France, or India to claim relief.
Case Study: Sarah’s Spanish Villa Surprise
Take Sarah, a Manchester-based business owner who inherited a £200,000 villa in Spain in 2024. She assumed it was IHT-free as it wasn’t in the UK. However, as a UK resident for 15 years, her worldwide estate was taxable. The villa pushed her estate over £500,000, incurring £80,000 in IHT. Had she checked HMRC’s IHT417 form requirements, she could’ve planned for relief under the UK-Spain double tax treaty, potentially saving thousands.
Common Pitfalls to Avoid
In my years advising clients, I’ve seen these mistakes repeatedly:
● Underreporting Assets: A 2023 HMRC case saw a £47,000 penalty for failing to report a Swiss bank account. Use the Worldwide Disclosure Facility to correct errors.
● Assuming Residency Equals Domicile: Moving abroad doesn’t instantly change your domicile. You need strong evidence of a permanent move.
● Ignoring Exchange Rates: IHT is calculated in sterling, so currency fluctuations can inflate your liability. A client’s US shares spiked in value due to a weak pound, costing an extra £20,000 in IHT.
Worksheet: Estimating Your IHT Liability
Use this checklist to estimate your potential IHT exposure on foreign assets:
● Asset Inventory:
○ UK assets (e.g., property, savings): £______
○ Foreign assets (e.g., overseas property, shares): £______
● Liabilities:
○ UK debts (e.g., mortgage): £______
○ Foreign debts (deductible only against foreign assets): £______
● Net Estate Value: Total assets – liabilities = £______
● Thresholds:
○ Apply £325,000 nil-rate band: £______
○ Apply £175,000 RNRB (if eligible): £______
● Taxable Amount: Net estate – thresholds = £______
● IHT Due: Taxable amount × 40% = £______
This worksheet helps you visualise your estate’s exposure. For complex cases, like business owners with overseas investments, consult a tax advisor to factor in reliefs like Business Property Relief (BPR).
Interactive UK IHT Statistics: Comprehensive Analysis of Tax Receipts, Estate Values & International Assets
Advanced Strategies for Managing UK Inheritance Tax on Foreign Assets
None of us loves tax surprises, but here’s how to avoid them when dealing with foreign assets in your estate. After grasping the basics of UK inheritance tax (IHT) and how it applies to overseas property, shares, or savings, it’s time to get proactive. As a chartered accountant with over 15 years advising UK taxpayers, I’ve helped clients from London to Leeds navigate the IHT maze, often saving them thousands through clever planning. This part dives into advanced strategies, tailored for employees, self-employed individuals, and business owners, with practical tools to minimise your IHT liability on foreign assets.
How Can You Reduce IHT on Foreign Assets?
So, you’ve got a holiday home in France or shares in a Singapore company – what’s the plan to keep HMRC’s hands off your estate? Here are proven strategies to cut your IHT bill, backed by HMRC’s 2025/26 rules:
● Gifting Assets Early: Gifts made more than seven years before death are IHT-free (known as Potentially Exempt Transfers, or PETs). For example, transferring a foreign property to your children now could save 40% IHT later. Be careful: gifts with reservation (e.g., you still use the property) don’t count.
● Using Trusts: Placing foreign assets in a discretionary trust can remove them from your estate for IHT purposes. However, transfers to trusts may trigger an immediate 20% IHT charge if above the £325,000 nil-rate band. In 2024, I advised a client who saved £150,000 by setting up a trust for her Italian vineyard before her estate crossed £2m.
● Leveraging Business Property Relief (BPR): If your foreign assets are tied to a qualifying business (e.g., shares in an unlisted trading company), BPR can reduce their IHT value by 50% or 100%. This is a goldmine for business owners but requires careful structuring.
● Spousal Exemption: Transfers to a UK-domiciled spouse or civil partner are IHT-free. For non-UK domiciled spouses, the exemption is capped at £325,000 unless they elect to be treated as UK-domiciled.
IHT Relief Options for Foreign Assets | Key Details |
Potentially Exempt Transfers (PETs) | Gifts free of IHT if you survive 7 years; no limit on amount. |
Discretionary Trusts | Removes assets from estate; 20% entry charge may apply. |
Business Property Relief (BPR) | 50%-100% relief on qualifying business assets, including some foreign shares. |
Spousal Exemption | Unlimited for UK-domiciled spouses; £325,000 for non-domiciled. |
Source: HMRC IHT reliefs
Tailored Advice for Self-Employed and Business Owners
Now, let’s think about your situation – if you’re self-employed or a business owner, foreign assets like overseas investments or property used for business can complicate things. Here’s how to tackle IHT:
● Self-Employed with Side Hustles: If you run a consultancy and own a rental property abroad, that property might qualify for BPR if used in your business (e.g., as an office). A client in Bristol saved £60,000 by proving her Spanish flat was integral to her freelance design work.
● Business Owners with Overseas Shares: Unlisted shares in foreign companies can qualify for 100% BPR if the company is trading (not investment-focused). For example, a tech entrepreneur with shares in a Canadian startup avoided IHT by restructuring the shares to meet BPR criteria.
● IR35 and Foreign Assets: Post-2023 IR35 reforms tightened rules for contractors. If you’re deemed inside IR35, your foreign assets tied to personal service companies might not qualify for BPR. Check your status via HMRC’s CEST tool.
Double Taxation Treaties – Your Safety Net
Be careful here, because I’ve seen clients trip up when foreign assets are taxed twice. The UK has double taxation agreements (DTAs) with countries like the USA, France, and India to prevent this. For instance, if you inherit a US property taxed at 40% US estate tax, the UK-US DTA allows a credit against your UK IHT, potentially wiping out the liability. To claim relief, complete HMRC’s IHT417 form with details of foreign tax paid. In 2025, HMRC reported £12m in DTA reliefs claimed, so don’t miss out.
Case Study: Raj’s US Investment Headache
Take Raj, a self-employed consultant in Cardiff, who inherited $300,000 in US stocks in 2024. As a UK resident for 12 years, he faced IHT on the full amount. Without planning, his estate’s IHT bill hit £90,000. By applying the UK-US DTA and gifting some shares to his UK-domiciled wife, he reduced the liability to £30,000. Raj’s mistake? Not checking the DTA earlier, which cost him months of stress.
Practical Worksheet: Planning Your IHT Strategy
Use this checklist to map out your IHT mitigation plan for foreign assets:
● Asset Review:
○ List foreign assets eligible for gifting: £______
○ Identify business assets qualifying for BPR: £______
● Gifting Plan:
○ Assets to gift now (PETs): £______
○ Survival period needed (7 years): By [insert date]
● Trust Options:
○ Assets for discretionary trust: £______
○ Estimated entry charge (20% on excess over £325,000): £______
● DTA Eligibility:
○ Countries with taxable foreign assets: ______
○ Check DTAs via HMRC’s treaty list: Yes/No
● Spousal Exemption:
○ Assets transferable to spouse: £______
○ Confirm spouse’s domicile status: UK/Non-UK
This worksheet helps you prioritise actions. For example, a business owner might focus on BPR for overseas shares, while an employee with a holiday home might opt for gifting.
Navigating Currency and Valuation Challenges
Foreign assets mean dealing with exchange rates, and this can be a minefield. IHT is calculated in sterling at the date of death, using HMRC’s official exchange rates. A client in 2023 overpaid £15,000 because she used an outdated rate for her Australian property. Always check HMRC’s exchange rate tool for accuracy. For illiquid assets like foreign real estate, get a professional valuation in the local currency, then convert to sterling. HMRC can challenge valuations, so keep records.
Special Considerations for Scottish and Welsh Residents
If you live in Scotland or Wales, IHT rules are UK-wide, but local nuances apply. Scottish probate (confirmation) requires detailed asset reporting, including foreign property, which can delay IHT payments. In Wales, the process mirrors England, but rural business owners may face unique challenges valuing foreign agricultural assets. Always file IHT returns promptly to avoid 5% penalties, as HMRC cracked down on late filings in 2024, fining £8m across the UK.
Verifying and Resolving UK Inheritance Tax Issues on Foreign Assets
So, you’re staring at a pile of paperwork, wondering if you’ve got your inheritance tax (IHT) obligations on foreign assets sorted – sound familiar? Whether you’re an employee, self-employed, or a business owner, verifying your IHT liability and resolving disputes with HMRC can feel daunting. As a chartered accountant with over 15 years helping UK taxpayers, I’ve guided clients through HMRC audits and valuation disputes, often turning chaos into clarity. This final part focuses on practical verification processes, handling HMRC challenges, and rare scenarios like emergency IHT payments, with tools to ensure you’re not overpaying or underreporting.
How Do You Verify Your IHT Calculations?
It’s a bit of a minefield, but checking your IHT liability on foreign assets is crucial to avoid penalties. Here’s a step-by-step guide to ensure your calculations are spot-on, based on HMRC’s 2025/26 rules:
Log Into Your Personal Tax Account: Use your HMRC personal tax account to review your tax status, including residency history, which determines if foreign assets are taxable.
Complete Form IHT400: For estates with foreign assets, submit the IHT400 form with schedule IHT417 for overseas assets. Include valuations, debts, and double taxation relief claims.
Verify Asset Valuations: Obtain professional valuations for foreign property or shares, converted to sterling using HMRC’s exchange rate tool. In 2024, a client avoided a £25,000 penalty by correcting a misvalued French chalet.
Check Relief Eligibility: Confirm eligibility for Business Property Relief (BPR), spousal exemptions, or double tax treaty credits. Cross-reference with HMRC’s guidance on reliefs.
Submit and Pay: IHT is due within six months of death. Use HMRC’s online payment portal or bank transfer, ensuring you reference the estate’s unique IHT number.
Verification Checklist for IHT on Foreign Assets | Action Required |
Residency Status | Confirm via personal tax account. |
Asset Valuations | Professional valuation in local currency, converted to sterling. |
Form IHT400 & IHT417 | Complete and submit within 6 months. |
Relief Claims | Document BPR, spousal exemption, or DTA credits. |
Payment Deadline | Pay IHT within 6 months to avoid 2.5% interest. |
Source: HMRC IHT forms
UK Inheritance Tax Issues on Foreign Assets Calculator
Handling HMRC Disputes and Overpayments
Picture this: HMRC challenges your valuation of a Dubai apartment, claiming it’s worth £100,000 more than reported. Disputes like this are common, especially with foreign assets. In 2023, HMRC issued £10m in penalties for incorrect IHT filings. Here’s how to handle disputes:
● Respond Promptly: HMRC may query valuations or relief claims. Provide evidence like valuation reports or double tax treaty documents within 30 days.
● Request a Review: If you disagree with HMRC’s assessment, request an internal review via your personal tax account. A client in Leeds overturned a £40,000 penalty by proving her US shares qualified for BPR.
● Appeal to Tribunal: If the review fails, escalate to the First-tier Tribunal. Legal advice is wise here, as costs can mount.
● Check for Overpayments: If you’ve overpaid IHT (e.g., due to an incorrect valuation), claim a refund within four years using form IHT38. HMRC refunded £200m in overpaid IHT in 2024.
Rare Scenarios: Emergency IHT and High-Value Estates
Be careful here, because I’ve seen clients trip up in unusual situations. Two rare cases to watch for:
● Emergency IHT Payments: If foreign assets delay probate (e.g., a complex Brazilian property sale), you may face an emergency IHT demand. Arrange instalments with HMRC’s IHT420 form to spread payments over 10 years, especially for illiquid assets like land.
● High-Income Estates and Child Benefit Charges: If your estate exceeds £2m, the residence nil-rate band (RNRB) tapers by £1 for every £2 over, potentially wiping it out at £2.35m. For high earners with foreign assets, this can overlap with High-Income Child Benefit Charges, reducing disposable income for IHT planning. A 2024 case saw a London executive lose £50,000 in RNRB due to an untracked Swiss account.
Case Study: Emma’s Italian Inheritance Woes
Take Emma, a self-employed graphic designer in Glasgow, who inherited a £400,000 Italian villa in 2025. As a long-term UK resident, she faced IHT on the villa. She initially undervalued it at £300,000, triggering an HMRC query. By submitting a revised valuation and claiming UK-Italy double tax relief, she reduced her IHT bill from £120,000 to £80,000. Emma’s lesson? Always double-check valuations and treaty benefits early.
Worksheet: Resolving IHT Issues
Use this checklist to audit your IHT obligations and spot issues:
● Estate Details:
○ Total value of foreign assets: £______
○ Confirmed valuations (attach reports): Yes/No
● HMRC Filings:
○ IHT400 and IHT417 submitted: Yes/No
○ Double tax relief claimed: Country ______ / Amount £______
● Dispute Check:
○ HMRC queries received: Yes/No
○ Evidence prepared (e.g., valuation reports): Yes/No
● Overpayment Review:
○ Suspected overpayment: £______
○ IHT38 form filed: Yes/No
● Payment Plan:
○ Instalment option needed: Yes/No
○ IHT420 form submitted: Yes/No
This worksheet helps you stay organised and proactive, especially for complex estates with multiple foreign assets.
Scottish and Welsh Nuances
For Scottish residents, the confirmation process requires detailed foreign asset reporting, often delaying IHT payments. In Wales, rural business owners with foreign agricultural assets face valuation challenges. Both regions follow UK IHT rules, but local probate processes can complicate timelines. File early to avoid HMRC’s 5% late penalty, which hit £2m in Scotland alone in 2024.
Summary of Key Points
IHT Applies to Worldwide Assets: UK-domiciled or long-term residents (10/20 years) face IHT on global assets at 40% above £325,000.
○ Check residency via your personal tax account.
Residence Nil-Rate Band Boosts Threshold: £175,000 RNRB applies for main residences left to descendants, but tapers above £2m.
Gifting Reduces Liability: Gifts made 7+ years before death (PETs) are IHT-free; plan early to maximise savings.
Trusts Can Protect Assets: Discretionary trusts remove assets from your estate, though a 20% entry charge may apply.
Business Property Relief Saves Money: Qualifying foreign business assets (e.g., unlisted shares) can get 50%-100% IHT relief.
Double Tax Treaties Prevent Double Hits: Claim relief for foreign taxes paid using IHT417 form.
Accurate Valuations Are Critical: Use professional valuations and HMRC’s exchange rate tool to avoid disputes.
Check for Overpayments: Claim refunds within 4 years using IHT38 if you’ve overpaid due to errors.
Handle Disputes Swiftly: Respond to HMRC queries with evidence; escalate to review or tribunal if needed.
Plan for Rare Cases: Use instalments for illiquid assets via IHT420 form; watch for RNRB taper in high-value estates.
FAQs
Q1: Can someone avoid IHT on foreign assets by moving abroad?
A1: It’s a common mix-up, but moving abroad doesn’t instantly dodge IHT. For the 2025/26 tax year, if you’ve been a UK resident for 10 of the last 20 years, HMRC taxes your worldwide assets for up to 10 years after leaving. A client in Bristol tried this by relocating to Spain, only to find her French holiday home still taxable due to her long-term UK residency. Plan carefully and consider professional advice to change your domicile status.
Q2: How does HMRC value foreign property for IHT purposes?
A2: HMRC requires a market valuation in the local currency, converted to sterling using their official exchange rates at the date of death. In my experience, clients often underestimate this. For instance, a Manchester retiree’s Greek villa was valued 20% higher than expected due to a local property boom, increasing her IHT bill by £30,000. Always get a professional valuation from a local expert to avoid disputes.
Q3: Are foreign pensions exempt from IHT for non-UK domiciled individuals?
A3: Well, it’s worth noting that certain foreign pensions, like Qualifying Non-UK Pension Schemes (QNUPS), are often treated as excluded property for non-UK domiciled individuals, escaping IHT. A London-based client with a Singapore pension saved £50,000 by confirming its QNUPS status. Check the pension’s structure with a tax advisor, as some overseas schemes may still be taxable if linked to UK employment.
Q4: What happens if someone forgets to report a foreign bank account in their estate?
A4: Forgetting a foreign account can lead to hefty penalties. HMRC’s Worldwide Disclosure Facility caught a Leeds executor in 2024 who omitted a £100,000 Swiss account, resulting in a £35,000 fine. You can correct this by voluntarily disclosing within 12 months of death, potentially reducing penalties. Act fast and gather bank statements to avoid escalating costs.
Q5: Can someone claim IHT relief on foreign business assets held in a partnership?
A5: In my experience with business owners, Business Property Relief (BPR) can apply to foreign partnership assets if they’re used in a trading business. A Cardiff restaurateur with a stake in a French bakery partnership slashed her IHT by 100% on that asset. The catch? The partnership must be actively trading, not just holding investments, so document its operations clearly.
Q6: How does IHT apply to foreign assets inherited by a non-UK resident beneficiary?
A6: The beneficiary’s residence doesn’t affect IHT—it’s the deceased’s status that matters. If the deceased was UK-domiciled or a long-term resident, worldwide assets are taxable. A client’s daughter in Australia inherited a £200,000 US property in 2025 and faced a £40,000 IHT bill because her UK-based father was liable. Beneficiaries should check the estate’s tax status early.
Q7: Are cryptocurrency assets held abroad subject to IHT?
A7: Crypto assets are a tricky one. HMRC considers them situated where you’re resident, not where the wallet is stored. A self-employed developer in Glasgow holding Bitcoin in a Cayman exchange paid £20,000 IHT in 2024 because he was UK-domiciled. Always report crypto in your estate and use HMRC’s valuation guidelines to avoid surprises.
Q8: Can someone use life insurance to cover IHT on foreign assets?
A8: Absolutely, life insurance can be a lifesaver here. A policy written in trust can pay out to cover IHT without adding to your estate. A Birmingham shop owner used a £300,000 policy to cover IHT on her Spanish rental property, saving her family from selling it. Ensure the policy is trust-based to keep it IHT-free.
Q9: What if someone’s foreign assets are in a country with no UK double tax treaty?
A9: Without a treaty, you might face tax in both countries with no relief. A client with a Dubai property paid 15% local tax and 40% UK IHT in 2024, losing £70,000. You can sometimes claim unilateral relief for foreign tax paid, but it’s capped at the UK IHT rate. Check HMRC’s rules and plan asset transfers to treaty countries if possible.
Q10: How does IHT apply to foreign assets held in a trust?
A10: Trusts can be complex, but here’s the gist: foreign assets in a discretionary trust are taxable if the settlor was UK-domiciled or a long-term resident at setup. A London client’s Mauritius trust, set up in 2023, incurred a 20% entry charge on £500,000 of assets. Regular 10-year charges also apply, so review trust terms with an IHT advisor to avoid unexpected bills.
Q11: Can business owners offset foreign debts against UK assets for IHT?
A11: Unfortunately, foreign debts only reduce the value of the specific foreign asset they’re tied to. A Liverpool entrepreneur with a £100,000 US loan against a £300,000 property couldn’t offset it against her UK assets, increasing her IHT by £40,000. Keep clear records of debt allocations to ensure accurate calculations.
Q12: How does Scottish probate affect IHT on foreign assets?
A12: Scottish confirmation requires detailed foreign asset reporting, which can delay IHT payments. A Glasgow client’s 2024 probate for a Canadian cabin took six months due to valuation disputes, incurring 2.5% interest. Submit accurate valuations early and liaise with Scottish courts to avoid penalties.
Q13: Are gifts of foreign assets to charities IHT-exempt?
A13: Gifts to UK-registered charities are IHT-free, but foreign charities don’t qualify unless they meet strict HMRC criteria. A client donating a French painting to a local museum saved £10,000 in IHT, but only because the charity was UK-registered. Verify the charity’s status before gifting.
Q14: What if someone’s foreign assets are tied up in a legal dispute at death?
A14: Assets in dispute are still taxable based on their market value at death. A Leeds retiree’s contested Italian land was valued at £250,000, triggering £50,000 IHT despite ongoing litigation. Document the dispute and consider instalment payments via HMRC’s IHT420 form to manage cashflow.
Q15: Can someone use agricultural relief for foreign farmland?
A15: Agricultural Property Relief (APR) can apply to foreign farmland if used for agriculture and owned for at least two years. A Welsh farmer saved £80,000 on Spanish farmland by proving active use. Ensure the land meets HMRC’s agricultural definition, as investment land won’t qualify.
Q16: How does IHT apply to foreign assets for self-employed contractors under IR35?
A16: If you’re inside IR35, foreign assets tied to your personal service company may not qualify for BPR. A 2024 case saw a London contractor lose £60,000 in relief on US shares because her company was deemed non-trading. Check your IR35 status with HMRC’s CEST tool to confirm eligibility.
Q17: What if someone inherits foreign assets but can’t access them?
A17: Inaccessibility doesn’t exempt assets from IHT. A Southampton teacher inherited a frozen Russian account in 2025, still facing £15,000 IHT. Apply for instalment payments if liquidity is an issue, and document access restrictions for HMRC’s consideration.
Q18: Are foreign life insurance payouts subject to IHT?
A18: Foreign life insurance payouts are taxable if the policyholder was UK-domiciled or a long-term resident. A client’s US policy payout of $200,000 incurred £32,000 IHT in 2024. Placing the policy in a trust beforehand can avoid this, so plan early.
Q19: How does HMRC handle foreign assets in multiple jurisdictions?
A19: HMRC taxes all worldwide assets for UK-domiciled or long-term residents, regardless of jurisdiction. A Manchester business owner with assets in three countries faced a £200,000 IHT bill in 2025, simplified by consolidating valuations on IHT417. Use a single sterling conversion for consistency to avoid errors.
Q20: Can someone reduce IHT by transferring foreign assets to a non-UK domiciled spouse?
A20: Transfers to a non-UK domiciled spouse are IHT-exempt up to £325,000. A client in Edinburgh saved £40,000 by transferring a Canadian cottage to his non-domiciled wife in 2024. Beyond £325,000, IHT applies unless the spouse elects UK domicile status, so weigh the long-term tax implications.
About The Author:
Adil Akhtar, ACMA, CGMA, CEO and Chief Accountant of Pro Tax Accountant, is an esteemed tax blog writer with over 18 years of expertise in navigating complex tax matters. For more than three years, his insightful blogs have empowered UK taxpayers with clear, actionable advice. Leading Advantax Accountants as well, Adil blends technical prowess with a passion for demystifying finance, cementing his reputation as a trusted authority in tax education.
Email: adilacma@icloud.com
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