Tenants in Common and Inheritance Tax: What Non-UK Residents Need to Know

Owning UK property as tenants in common allows each co-owner to hold distinct shares, which can be left to different heirs.

For non-UK residents, this ownership structure can trigger inheritance tax (IHT) liabilities that are often overlooked until death.

In this article, we covered key considerations including:

• Do non-residents pay Inheritance Tax on UK assets?
• Do joint accounts count towards inheritance tax?
• Does joint tenancy avoid Inheritance Tax in the UK?
• What is the difference between joint tenancy or tenants in common?

My contact details are hello@adamfayed.com and WhatsApp ‪+44-7393-450-837 if you have any questions.

The information in this article is for general guidance only for UK non-residents who might own assets in the UK. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.

What does it mean to be a tenant in common?

Being a tenant in common means that two or more people own a property together, but each owner has a distinct share.

Unlike joint tenants, tenants in common can hold unequal shares (for example, 70/30). Each owner can sell, mortgage, or leave their share to someone different in their will.

This setup offers more flexibility for estate planning, particularly for non-UK residents concerned about inheritance tax.

How to tell if property is owned as tenants in common?

To determine if property is owned as tenants in common, check the title deed or Land Registry entry. The document will usually specify individual ownership percentages.

Legal documents may also indicate whether the property is joint tenancy or tenants in common, which directly affects what happens when an owner dies.

Can you change from tenants in common to joint ownership?

Yes, it is possible to convert property from tenants in common to joint ownership, but this typically requires a formal legal process.

All co-owners must agree, and the change must be registered with the Land Registry.

Non-residents should consider the tax implications carefully, as changing ownership could affect future inheritance tax liabilities in the UK.

Is it better to be joint tenants or tenants in common?

In choosing between joint tenants and tenants, you must consider your goals:

• Joint tenants: Ownership automatically passes to surviving owners upon death (right of survivorship).
• Tenants in common: Each owner can leave their share to heirs of choice through a will.

For non-UK residents, tenants in common may offer more control over estate planning, but joint tenants can sometimes reduce probate complexity.

What happens when one of the tenants in common dies in the UK?

When a tenant in common dies, their share of the property becomes part of their estate.

Non-resident owners need to be aware that the deceased’s share may be subject to UK inheritance tax, depending on the estate’s total value and applicable exemptions.

The surviving co-owners do not automatically inherit the deceased’s share, unlike joint tenants.

What is the tax rate for non-resident beneficiaries?

For non-UK residents who own assets in the UK, inheritance tax can be a significant consideration. Non-resident beneficiaries may face IHT at 40% on the value of the UK estate above the nil-rate band (£325,000 as of 2025).

The applicable tax depends on the deceased’s domicile status:

• If the deceased was UK-domiciled, all their worldwide assets could be subject to IHT, but non-resident beneficiaries are only liable on UK-situated assets.
• If the deceased was non-UK domiciled, only UK-situated assets are subject to IHT, with the same 40% rate applying above the nil-rate band.

For non-UK residents, careful planning using trusts, exemptions, or gifting strategies can help reduce IHT exposure on UK assets.

Who is exempt from paying Inheritance Tax in the UK?

Exemptions from UK inheritance tax include:

• Transfers to a spouse or civil partner: If the recipient is UK-domiciled, there is no inheritance tax to pay. However, if the recipient is not UK-domiciled, the exemption is limited to the value of the UK nil-rate band unless an election is made to be treated as UK-domiciled for tax purposes.
• Charitable donations: Gifts to registered UK charities are exempt from inheritance tax.
• Certain agricultural or business assets: Reliefs are available for qualifying agricultural property and business assets, which can reduce or eliminate inheritance tax liability.
• Estates below the nil-rate threshold: If the total value of the estate is below the nil-rate band, no inheritance tax is payable.

For non-residents, these exemptions can sometimes still apply, but it’s crucial to verify eligibility.

Additionally, double taxation treaties between the UK and other countries may provide relief to prevent the same assets from being taxed in both jurisdictions

How long do you have to live outside the UK to avoid inheritance tax?

Living abroad does not automatically exempt you from UK inheritance tax. However, non-UK domiciled individuals may reduce exposure to IHT on overseas assets.

Generally, your UK-situated assets remain subject to tax regardless of residency duration. Tax residency rules and domicile are complex, so professional advice is recommended.

Do joint accounts avoid Inheritance Tax?

No, joint accounts do not automatically avoid inheritance tax.

While the surviving account holder typically inherits the funds through the right of survivorship, HMRC may consider the deceased’s share of the account as part of their estate for IHT purposes, depending on individual contributions.

Proper structuring and documentation are essential to ensure accurate IHT assessments and to minimize potential liabilities.

Tenants In Common Vs Joint Tenants UK Inheritance Tax

For non-UK residents, choosing between tenants in common and joint tenants should balance control over inheritance with potential tax liabilities.

• Joint Tenants: Property automatically passes to the surviving co-owner(s) on death through the right of survivorship. The deceased’s share usually does not form part of their estate for probate purposes, which can simplify inheritance and sometimes reduce IHT exposure. HMRC may still consider gifts or contributions to the joint property when calculating tax liability.
• Tenants in Common: Each co-owner holds a distinct share that can be left to different beneficiaries via a will. Upon death, the deceased’s share becomes part of their estate and is subject to UK inheritance tax, even for non-residents. While this structure increases flexibility and control over inheritance, it may also increase IHT exposure compared with joint tenancy.

Conclusion

For non-UK residents who own assets in the UK, understanding the differences between tenants in common and joint tenants is crucial for effective estate planning.

Ownership structure directly affects inheritance tax liabilities, control over inheritance, and the flexibility to pass assets to chosen beneficiaries.

Careful planning, including the use of trusts, exemptions, and professional advice, can help minimize IHT exposure while ensuring your estate is distributed according to your wishes.

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