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A woman discussing her tax inheritance on the phone

What to do if you receive inheritance from abroad

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Tread warily if you’re due to receive an inheritance from abroad — it may not be as financially simple as it seems.

If an email arrives out of the blue announcing that you’re the recipient of a legacy from overseas, take care. This could be a dodgy document from an international fraudster. Look out for spelling mistakes or other irregularities and, if you’re in any doubt, show the communication to a lawyer or accountant.

Even if the inheritance is left outside the UK, it can still create immediate UK tax consequences if you’re a UK resident

If the legacy isn’t fake news, don’t assume a lawyer will pay cash into your bank account and that’s the end of it. You should take advice on how such an inheritance affects your tax position. Before making any definite spending plans, first check the location of the assets. Make sure any money you receive is net of foreign taxes, such as the local equivalents of inheritance tax or other taxes that may be due. Terry Jordan, senior adviser of chartered accountants and tax advisers BKL, explains: “A number of other countries levy taxes similar in nature to inheritance tax and the inheritor would be wise to satisfy themselves that any foreign tax due has been fully accounted for.”

Even if the inheritance is left outside the UK, it can still create immediate tax consequences here if you’re a UK resident, as bank interest arising overseas must be reported in a UK tax return. Kari Mellon, founder and owner of Opes Tax, warns: “Since the introduction of the Common Reporting Standard, HMRC receives data about offshore accounts.”

A woman reviews her tax inheritance windfall.
Reviewing a tax inheritance windfall. © Ivan Samkov

Whether UK inheritance tax is payable depends on the ‘domicile’ or permanent home of the person who has died. If their permanent home is abroad, inheritance tax is paid only on their UK assets, for example property or bank accounts they may have in the UK. For people with a permanent UK home or domicile, inheritance tax is payable on their worldwide assets.

HMRC will treat someone as being domiciled in the UK if they lived in the UK for 15 of the last 20 years or had their permanent home in the UK at any time in the last three years of their life.





If UK inheritance tax is due on an estate it’s normally the responsibility of the executors or administrators dealing with the estate to ensure it’s paid.

An unexpected windfall is an excellent time to think about your own heirs. Liz Cuthbertson, private client tax partner at chartered accountants Mercer & Hole, says: “Depending on the amount at stake, an inheritance often triggers the need to review your own overall estate, to consider tax and financial planning together with how your overall funds should be used, invested and, ultimately, pass on succession.” To avoid getting in an international tax tangle, it pays to seek advice.

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