Inheritance Tax on Overseas Property — Rules for UK-Domiciled Residents

Domicile — The Key Concept

For inheritance tax purposes, the critical factor is not where you live, but where you are domiciled. Domicile is broadly the country you regard as your permanent home — where you intend to end your days. It is a concept rooted in common law and is distinct from tax residence.

UK-domiciled individuals are subject to IHT on their worldwide assets — including property, investments and bank accounts in any country. There is no territorial limit.

Non-UK-domiciled individuals are generally only subject to IHT on UK-sited assets. Their foreign property falls outside the scope of UK IHT.

Deemed Domicile

Even if you were born abroad and hold non-UK domicile under common law, HMRC can treat you as deemed domiciled in the UK for IHT purposes if you have been UK-resident for 15 of the previous 20 tax years. Once deemed domiciled, your worldwide assets (including overseas property) are subject to UK IHT.

Note: changes to the non-domicile rules introduced in the 2024 Autumn Budget took effect from 6 April 2025, replacing deemed domicile with a residence-based regime for most taxes (though the detailed IHT rules have specific transitional provisions). Anyone affected by these changes should take specialist advice.

Overseas Property in a UK Estate

If you are UK-domiciled and own a holiday villa in Spain, an apartment in Portugal or an investment property in France, those assets are counted in your estate at their full market value for UK IHT purposes. The fact that the property is located abroad does not reduce the UK IHT charge.

Double Tax Treaties

Some countries levy their own inheritance or estate taxes. The UK has double taxation treaties with a number of countries (including the USA, France, India and others) which can prevent the same assets being taxed twice. Where a treaty applies, UK IHT paid on foreign property may be offset against local tax — and vice versa. However, the treaties vary considerably in their scope and operation, and not every country has a treaty with the UK.

Practical Challenges

Overseas property creates several practical difficulties for IHT:

• Valuation: The executor must obtain a market valuation of the property in the local currency, converted to sterling at the exchange rate on the date of death.
• Probate abroad: Many countries require a separate probate or succession process before the executor can sell or transfer the property. This can delay the UK IHT timeline considerably.
• Illiquidity: Selling overseas property takes time. If IHT must be paid before probate is granted and liquid assets in the estate are insufficient, the executor may need to arrange bridging finance.

Planning for Overseas Property

UK-domiciled owners of overseas property should consider:

• Reviewing whether the property can be owned through a structure that reduces IHT exposure (specialist advice required — some offshore structures that were once effective have been closed off by legislation)
• Ensuring a will is in place in the relevant country — UK wills may not be recognised or may not cover assets in all jurisdictions
• Discussing with a solicitor whether a life assurance policy written in trust could fund the IHT bill attributable to the overseas property

Use our [Inheritance Tax Calculator](/inheritance-tax-calculator) to include the value of overseas property when estimating your estate's total IHT liability.

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