Gifts and inheritances between the UK and abroad

UK inheritance tax is a tax on the person who dies, paid out of their estate. Plenty of other countries tax the person who inherits instead, and when your family is split between the two, both can come knocking.

The short version

UK inheritance tax (IHT) is charged on the estate at 40% above the £325,000 nil-rate band, with up to £175,000 more for a home left to children or grandchildren. Both are frozen until 5 April 2031 [1][2][3].
Since 6 April 2025, whether your worldwide assets are in UK IHT depends on long-term UK residence (10 of the last 20 tax years), not domicile. Brits who leave keep it for up to 10 years [4].
Lifetime gifts are usually free of IHT if the giver lives seven more years. The £3,000 annual exemption, £250 small gifts and regular gifts out of income are free straight away [5].
The UK doesn't tax the heir. But if you live in a country with an inheritance or gift tax on recipients, you may owe tax there on money from the UK.
From 6 April 2027, most unused pension funds and death benefits will count towards the estate for IHT [6][7].

How UK inheritance tax works, in one cuppa

When someone dies, their estate (everything they own, less debts) is valued. The first £325,000 is the nil-rate band and is taxed at 0%. Anything above is taxed at 40%, or 36% if at least 10% of the net estate goes to charity [1]. If a home passes to children, stepchildren or grandchildren, the residence nil-rate band adds up to £175,000, so the threshold can reach £500,000 [1]. It's withdrawn gradually for estates above £2 million [2].

Unused bands can pass to a surviving spouse or civil partner, which is why a married couple can often pass on up to £1 million between them [1]. These figures are the same for 2025/26, 2026/27 and 2027/28, and the Finance Act 2026 extends the freeze to the 2030/31 tax year [2][3].

The tax is paid by the executors out of the estate before anyone gets their share. You, as the heir, don't fill in a UK tax return because you inherited.

Which assets are in: the long-term residence test

Until April 2025, the question was domicile, which followed many Brits around the world for life. From 6 April 2025 the test is long-term UK residence. You're a long-term UK resident in a tax year if you were UK tax resident for at least 10 of the previous 20 tax years [4].

Long-term UK resident: worldwide assets are in scope for UK IHT, including your flat in Lisbon or your account in Toronto.
Not long-term UK resident: only UK assets are in scope, such as a house in Swindon or a UK bank account.

The catch is the "tail". After you leave, you stay a long-term resident for up to 10 tax years. The tail is shorter if you lived in the UK for less time: with 10 to 13 years of UK residence it ends after three years abroad, with 14 years after four, and with 15 years after five [4]. A typical Brit who grew up and worked in the UK and moved abroad at 40 carries the full 10-year tail. Our guide on inheritance tax after the 2025 residence rules goes through the tail in detail.

One wrinkle for mixed couples: gifts between spouses are normally unlimited and tax-free. If the giver is a long-term UK resident and the receiving spouse isn't, the exemption is capped at the nil-rate band, currently £325,000 [8]. If your partner isn't British and has never lived in the UK, that matters.

Giving money while you're alive

Most gifts are "potentially exempt transfers". They're ignored for IHT if the giver survives seven years. Some exemptions apply straight away, whatever happens [5]:

Exemption	How much	Notes
Annual exemption	£3,000 per tax year	Unused amount carries forward one year only
Small gifts	Up to £250 per person per tax year	Not to someone who also got the annual exemption
Wedding or civil partnership	£5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else	Given on or before the day
Normal expenditure out of income	No set limit	Regular, from income, and you can still afford your usual lifestyle
Spouse or civil partner	Unlimited	Capped at £325,000 if the receiving spouse isn't a long-term UK resident [8]
Charities and political parties	Unlimited

The gifts-out-of-income exemption is the underrated one. A parent in Kent who sends £400 a month to a daughter in Melbourne out of their pension, and still lives comfortably, may never have that money count. Keep records. Executors have to show it was regular and came from income, not savings.

The seven-year rule and taper relief

If the giver dies within seven years, the gift is added back into the estate. Gifts use up the nil-rate band first. Tax is only due on gifts above the £325,000 band, and then a sliding scale applies [5]:

Years between gift and death	Tax rate on the gift
Less than 3	40%
3 to 4	32%
4 to 5	24%
5 to 6	16%
6 to 7	8%
7 or more	0%

Two traps. First, a gift with strings attached, such as giving your children the family home and carrying on living in it rent-free, usually doesn't count as a gift at all. Second, gifts into most trusts are taxed differently and can be charged straight away. Both need proper advice.

Inheriting from the UK while you live abroad

Say your mum dies in Cardiff and leaves you a share of her house and savings. On the UK side:

The executors value the estate, report it to HMRC and pay any IHT, usually before the grant of probate is issued.
They sell or transfer assets and pay out the shares. Living abroad doesn't change your share or add any UK tax on receiving it.
If you inherit UK property and keep it, any later rent or sale is your business: the Non-Resident Landlord Scheme for rent, and non-resident capital gains tax and the 60-day return if you sell. Your base cost for the gain is usually the value at death.

Then comes the other country. Many countries, including several in Europe, charge inheritance or gift tax on the person receiving, based on where the heir lives, often with lower rates and bigger allowances for children than for distant relatives or friends. Others, such as Australia and New Zealand, have no inheritance tax at all, and Canada taxes gains at death rather than the inheritance. Some countries also expect you to declare large incoming gifts or inheritances even when no tax is due, or ask banks to check where large transfers come from. Check your country's tax office pages before the money lands, not after.

When both countries tax the same estate

The UK has inheritance tax treaties with only six countries: Ireland, South Africa, the USA, the Netherlands, Sweden and Switzerland. Older treaties with France, Italy, India and Pakistan work differently [9]. Where there's no treaty, the UK gives a credit for foreign tax charged on assets located in that country, capped at the UK tax on them [9]. The other country may or may not give a credit for UK IHT. Since the UK taxes the estate and many countries tax the heir, the two systems don't always line up neatly, and it's possible to pay twice. A tax adviser who knows both countries can check your case.

Giving money from abroad to family in the UK

Sending a deposit to your son in Bristol or paying your granddaughter's uni fees from Dubai isn't taxed in the UK when he or she receives it. The UK question is your own IHT position: if you're still a long-term UK resident, or the money comes from UK assets, the seven-year rule and exemptions above apply as normal. Your country of residence may have its own gift tax on the giver or the recipient, so check that too. For large transfers, banks on both sides may ask where the money came from, so keep a letter saying it's a gift.

Pensions from April 2027

Today, most unused defined contribution pension pots fall outside the estate. That ends for deaths on or after 6 April 2027. The Finance Act 2026 brings most unused pension funds and death benefits into the estate for IHT, with the personal representatives responsible for reporting and paying [6][7]. Death-in-service benefits from registered schemes and dependants' scheme pensions are excluded [6]. If your plan was "leave the pension untouched for the kids", it's worth a review. Never move a pension abroad to get round this without regulated financial advice: transfers can trigger the overseas transfer charge and attract scammers.

Our community groups for Brits abroad are full of people sorting out a parent's estate from the other side of the world, so you won't be the only one with HMRC on hold at 3am.

Gifts and inheritances across borders: what the UK taxes, and what the other country might