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Previously this was decided on an individual’s domicile status but that was changed in April 2025. Instead, the tax position depends primarily on the long term residency, with the location of the asset affecting the order in which tax is charged rather than whether it applies.
Key Takeaways
- UK long term resident individuals are liable to inheritance tax on worldwide assets
- The jurisdiction where the asset is situated usually taxes first
- The UK then assesses inheritance tax on the overall estate
- Foreign tax may be credited against UK liability
- The overall tax burden often approaches the UK rate
Long term residency status determines exposure
‘Long-term’ UK residents are defined as those who have been a UK resident for at least 10 out of the last 20 tax years. Those aged 20 or younger will be long-term residents only if they have been UK resident for at least 50 per cent of the tax years since their birth.
Where an individual is a UK long term resident, their worldwide estate generally falls within the scope of UK inheritance tax. This includes overseas property, bank accounts and investments.
Former long-term residents will remain in scope for between 3 and 10 years after leaving the UK.
Moving assets abroad does not, in itself, remove UK inheritance tax liability.
Order of Taxation
In most cases the country in which the asset is located applies its inheritance or estate tax first.
The UK then calculates inheritance tax on the total estate. Tax paid overseas may be credited against the UK liability where relief is available.
Foreign tax therefore reduces the UK liability but does not usually replace it.
Double Taxation Agreements
Where a double taxation agreement exists, credit is normally given for tax paid in the foreign jurisdiction.
However, as UK inheritance tax is comparatively high, the effective tax payable across jurisdictions frequently remains close to the UK rate.
Administrative Complexity
While the overall tax outcome may not differ significantly, overseas assets commonly introduce additional complications:
- multiple probate procedures
- differing legal requirements
- currency valuation issues
- coordination between advisers in separate jurisdictions
The administrative burden on executors and beneficiaries is therefore often increased.
Planning Considerations
Where overseas assets are owned or contemplated:
- Long term residency status should be reviewed
- local advice should be obtained in the relevant jurisdiction
- wills should operate in individual jurisdictions
- the assets should be incorporated into the wider inheritance tax strategy
What Is Often Misunderstood
Inheritance tax exposure is determined primarily by the individual rather than the asset.
Holding property abroad typically alters the mechanics of taxation rather than removing liability.
Conclusion
Assets situated outside the UK remain within the inheritance tax regime where the owner is a UK long term resident.
The foreign jurisdiction generally taxes first, after which the UK assesses the overall estate. Relief for foreign tax is available, but the total effective rate often remains broadly aligned with UK inheritance tax.
Planning should therefore focus on coordination and structure rather than assuming overseas ownership provides exemption.
Disclaimer. The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. UK tax legislation changes frequently, and the specific application of any rule or strategy depends on individual circumstances. Figures, thresholds, and reliefs mentioned are correct as of the 2026 to 2027 tax year unless otherwise stated. Before acting on any information here, consult a qualified adviser who has reviewed your full situation. Bluebond Tax Planning provides personal recommendations only under a signed client agreement, following a full review. Bluebond Tax Planning operates under UK legal frameworks and recognised professional conduct standards. Tax planning and legal work are not FCA regulated.
