Inheritance tax in the UK is charged at up to 40 percent on estates above certain thresholds and can apply to both residents and non-residents who own UK assets.
For expats and foreigners, exposure depends on domicile status, asset location, and how the estate is structured.
Questo articolo tratta di:
- How much can you inherit in the UK without paying tax?
- What is the 7 year rule in inheritance tax in the UK?
- How to legally avoid inheritance tax in the UK?
- Is a house included in inheritance tax UK?
Punti di forza:
- UK inheritance tax can apply even if you live outside the UK.
- Domicile matters more than residency for inheritance tax exposure.
- UK property is taxable regardless of nationality.
- Advance planning can significantly reduce the effective tax rate.
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What are the new inheritance tax rules in the UK? (2025-2027 Changes)
One of the most important changes in the UK is the continued freeze of the inheritance tax nil-rate band at £325,000 and the residence nil-rate band at £175,000 until April 2030.
The country has announced major inheritance tax reforms that will take effect between 2025 and 2027, significantly expanding who is taxed and which assets fall within the inheritance tax net.
Because these thresholds have not increased in line with asset prices, more estates are becoming liable for IHT in real terms.
From April 2025, the UK also shifted inheritance tax from a domicile-based system to a long-term residence-based system.
Individuals who have been UK tax resident for at least 10 of the previous 20 tax years will be subject to inheritance tax on their worldwide assets.
Those who leave the UK may remain within the inheritance tax net for up to 10 years after becoming non-resident.
Long-term non-residents will generally only be liable on UK assets.
Further reforms take effect from April 2026, particularly impacting business owners and farmers.
Agricultural Property Relief and Business Property Relief, which were previously unlimited, will be capped.
Full relief will apply only to the first £1 million of qualifying assets, with any excess receiving partial relief, resulting in an effective inheritance tax rate of up to 20 percent on the balance.
From April 2027, unused pension funds and death benefits will be included in the deceased’s estate for inheritance tax purposes.
This represents a significant change for expats who previously relied on pensions as an inheritance tax-efficient asset.
In some cases, beneficiaries may also face income tax on withdrawals, increasing the overall tax burden.
For non-residents, UK-situs assets such as property, land, and certain investimenti remain subject to UK inheritance tax regardless of nationality.
What is the inheritance tax rate in the UK?
The standard UK inheritance tax rate is 40 percent. This rate applies to the portion of the estate that exceeds available tax-free thresholds.
A reduced rate of 36 percent may apply if at least 10 percent of the net estate is left to charity.
Transfers between spouses or civil partners are generally exempt, provided both are UK domiciled. If one spouse is non-UK domiciled, exemptions may be capped unless an election is made.
Why is UK inheritance tax so high?
IHT in the UK is often viewed as high because a 40 percent rate applies above relatively low, frozen thresholds, while rising property values have pushed more estates into the tax net.
Policy debates around wealth concentration have also shaped the structure and persistence of the tax.
How much can you inherit without paying tax in the UK?
Most individuals in the UK can pass on up to £325,000 free of inheritance tax under the standard nil-rate band.
In addition, the residence nil-rate band allows up to £175,000 to be passed on when a main residence is left to direct descendants.
Combined, this can allow up to £500,000 per person, or £1 million for married couples or civil partners, to be inherited tax-free if structured correctly.
These thresholds have been fixed at current levels until at least April 2030, meaning rising property values continue to push more estates above the inheritance tax threshold.
Can I give my house to my son to avoid inheritance tax in the UK?
Gifting a house to a child does not automatically avoid UK IHT.
If you continue living in the property rent-free, the gift may be treated as a gift with reservation of benefit, meaning the property remains part of your estate for inheritance tax purposes.
Even if the gift is effective for inheritance tax, capital gains tax may apply at the time of transfer.
This makes outright gifting of property a complex decision that requires careful planning.
Do you pay tax if you inherit a house in the UK?
Beneficiaries do not usually pay inheritance tax personally. Instead, inheritance tax is paid by the estate before assets are distributed.
However, inheriting a house can create future tax exposure, particularly capital gains tax, if the property is later sold and it is not the beneficiary’s main residence.
How to avoid paying capital gains tax on inherited property in the UK?
You can avoid paying or minimize capital gains tax on inherited UK property by selling it shortly after inheritance or using it as your main residence.
Inherited property is revalued at the date of death, establishing a new base cost for capital gains purposes.
Selling quickly can minimize or eliminate capital gains tax.
Using the property as your main residence may provide principal private residence relief, though availability depends on residency, length of occupation, and whether the property qualifies as your primary home.
For non-UK resident heirs, UK capital gains tax generally applies only to UK property, and some reliefs may be restricted.
Overseas tax rules may also affect the total liability.
What is the loophole for inheritance tax in the UK?
There is no single loophole, but rather a series of reliefs and exemptions built into the UK tax system.
Business relief, agricultural relief, and spousal exemptions can significantly reduce or eliminate inheritance tax in qualifying cases.
These reliefs are highly technical and increasingly scrutinized by HMRC.
How do I avoid 40% inheritance tax in the UK?
You can avoid or reduce the 40% inheritance tax in the UK by using available allowances, exemptions, and planning strategies.
1. Use the Nil-Rate Band and Residence Nil-Rate Band
Maximize the nil-rate band and residence nil-rate band to pass up to £500,000 per person, or £1 million for married couples or civil partners, free of inheritance tax.
2. Transfers Between Spouses
Transfers between spouses or civil partners are generally exempt, allowing deferral or elimination of tax on the first death.
3. Lifetime Gifting
Reduce your taxable estate by making lifetime gifts. Gifts given more than seven years before death or regular gifts from surplus income may escape inheritance tax entirely.
4. Charitable Giving
Donations to qualifying charities can lower the effective inheritance tax rate, with the headline rate potentially falling from 40% to 36% if thresholds are met.
5. Reliefs on Certain Assets
Some assets qualify for special reliefs:
-Business Property Relief (BPR)
-Agricultural Property Relief (APR)
These reliefs can reduce or eliminate inheritance tax, though some are subject to upcoming reforms.
6. Trust Planning and Life Insurance
Placing life insurance in trust or using trusts strategically can fund or mitigate inheritance tax liabilities efficiently.
7. Consider Domicile and Residence Status
For expats and foreign nationals, domicile and long-term residence determine which assets fall into the UK inheritance tax net.
8. Structuring Assets and Pensions
Careful ownership structuring, reviewing pensions, and understanding which assets are taxable can significantly reduce or eliminate inheritance tax exposure.
Can I leave the UK to avoid inheritance tax?
No. Leaving the UK does not automatically remove inheritance tax exposure. UK IHT is not based solely on residence.
Many individuals remain within the UK inheritance tax system for years after leaving, particularly where domicile or long-term residence rules apply.
In addition, non-residents who own UK property or other UK-situs assets will still be subject to UK inheritance tax on those assets.
What is the 7 year rule in the UK for inheritance?
The 7 year rule means that most lifetime gifts become free of inheritance tax if the donor survives for seven years after making the gift.
If the donor dies within seven years, the gift may still be subject to inheritance tax, although taper relief can reduce the tax due depending on how long the donor survived after making the gift.
Conclusione
UK inheritance tax is less about headline rates and more about timing, asset type, and long-term status.
For expats and international families, small structural decisions can have disproportionate tax consequences, especially as UK rules increasingly target worldwide assets and pensions.
With thresholds frozen and reforms expanding the tax net, inheritance tax exposure is becoming harder to ignore, making forward-looking planning more important than last-minute fixes.
Domande frequenti
Can I gift 100k to my son in the UK?
Yes, you can gift £100,000 in the UK. It will normally be treated as a potentially exempt transfer, meaning it becomes exempt from inheritance tax if you survive seven years after making the gift.
If you die within seven years and your total gifts exceed available allowances, the gift may use up part of your nil-rate band and inheritance tax may become payable.
How does HMRC know about gifts from parents?
HMRC reviews bank records, estate accounts, and disclosures made by executors. Large gifts are often identified during estate administration.
Is it better to gift or inherit property in the UK?
In many cases, inheriting property is more tax-efficient than gifting it during lifetime.
Inheritance benefits from a market value uplift for capital gains tax, while gifting can reduce inheritance tax exposure but may trigger immediate capital gains tax.
The optimal approach still varies based on asset type, timing, and the family’s residency and domicile status.
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