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Reader Question:
If you inherit over £10,000,000 from abroad, what tax would there be to pay in the UK?
My answer:
Broadly speaking you could end up paying Income Tax, Capital Gains Tax or Inheritance tax on any assets you inherit.
If the asset you inherit produces an income then you may be liable to income tax going forwards. If you are resident for tax purposes in the UK then you will be liable for tax on any income produced whether the asset is in the UK or overseas. However, the position may be affected if you are not UK domiciled or not ordinarily resident in the UK. Also if future income is still derived from overseas then there may be a double taxation agreement in force which offsets any local income tax against your UK tax bill.
If you go on to make a capital gain on your inheritance (even if it remains an overseas asset) in the future then this will be subject to UK capital gains tax (CGT) if you are resident or ordinarily resident for tax purposes in the UK. Again for overseas property, the presence of a suitable double taxation relief with the country in question may override your liability to UK tax.
You usually won't have to pay Inheritance Tax (IHT) on money, assets or property you inherit. Inheritance Tax generally comes out of the deceased's estate before the inheritance is passed on. You will usually only owe Inheritance Tax on a legacy if either of the following apply:
- it says in the will that you should pay Inheritance Tax
- the deceased's estate can't afford to pay it
But there are a few other circumstance where you can find yourself paying inheritance tax. But given the sums of money involved I suggest that you seek the help of a qualified tax specialists/accountant.
Whether IHT tax was payable by the deceased's estate will depend on whether they were domiciled in the UK or deemed domiciled as well as any double taxation treaties that may be in place with the overseas territory in question.
Here is a guide to IHT and overseas assets and Here is a full explanation on what residency and ordinarily resident mean
