A letter from a solicitor in Sydney or Toronto says an uncle has left you money, and the first worry is what the UK will take. For the person receiving it the answer is nothing: Inheritance Tax is charged on estates, not on beneficiaries, and a foreign estate is usually outside it altogether. The questions that remain are about the estate, the income the money earns, and the benefits you claim.
The tax is on the estate, not on you
GOV.UK says Inheritance Tax is a tax on the estate, the property, money and possessions, of someone who has died, and that beneficiaries do not normally pay tax on things they inherit, though they may have related taxes to pay later (GOV.UK, How Inheritance Tax works: thresholds, rules and allowances: Overview, checked 1 November 2026).
So a UK resident who receives a share of a relative’s estate has no Inheritance Tax to pay on receiving it, wherever the estate was. Whether the estate owed UK tax is a separate question, and the answer is no unless the person who died was a long-term UK resident or held assets here.
When a foreign estate is taxed here
GOV.UK says that if you are based abroad, Inheritance Tax is only paid on your UK assets, for example property or bank accounts in the UK. HMRC will treat you as based abroad if you have lived in the UK for less than 10 years in the last 20 (GOV.UK, How Inheritance Tax works, checked 1 November 2026).
An aunt in Australia who never lived in Britain leaves nothing for HMRC unless she owned something here. Her Australian house, bank accounts and shares are outside the UK charge. GOV.UK adds that some assets are excluded even when UK-sited, such as foreign currency accounts with a bank, overseas pensions and holdings in authorised unit trusts.
The 10-in-20 test, and the old domicile rule
The test changed on 6 April 2025. HMRC’s manual says that for transfers on or after that date the question is whether the person was a long-term UK resident, and for transfers before it their domicile (HMRC Inheritance Tax Manual, IHTM04251, checked 1 November 2026).
GOV.UK says that for deaths on or before 5 April 2025 the person was treated as UK-based if their permanent home was in the UK, they had lived here for 15 of the last 20 years, or their permanent home was here at any time in their last three years (GOV.UK, How Inheritance Tax works, checked 1 November 2026).
The change catches the recently emigrated. A father who left the UK six years before he died has lived here for 14 of the last 20 years, so he is long-term UK resident and his whole estate is in scope, wherever the assets sit. One who left twelve years ago is not, and only UK assets count.
Two countries taxing the same asset
Where the country of death charges its own tax and the UK does too, the estate can claim relief. GOV.UK says that if the other country charges Inheritance Tax on the same property, the estate may reclaim through a double taxation convention (GOV.UK, Inheritance Tax: double Taxation Relief, checked 1 November 2026).
It lists agreements with Ireland, South Africa, the United States, the Netherlands, Sweden and Switzerland, and older estate duty treaties with France, Italy, India and Pakistan.
Where there is no agreement, GOV.UK says Unilateral Relief gives credit against Inheritance Tax for the tax charged by the other country on assets sited there, limited to the UK tax on that asset. Its example is an American apartment worth £35,000 in a £500,000 estate: UK tax apportioned to it of £4,900, American tax paid of £1,500, relief of £1,500. The claim is the executor’s, on the estate’s account.
The money is not income; what it earns is
Nothing in the UK’s income tax rules treats an inheritance as income, and there is no form for receiving one. GOV.UK’s foreign income guidance is about income: it says a UK resident will normally pay tax on foreign income, unless eligible for Foreign Income and Gains relief (GOV.UK, Tax on foreign income, checked 1 November 2026).
So interest on an inherited account left in Canada, dividends on inherited shares, or rent from an inherited flat abroad are foreign income, reported on a tax return. Bringing the capital itself into a UK account is not taxed. No GOV.UK page sets out what a bank asks when a large foreign transfer arrives; banks do ask about the source of funds under money laundering rules, and the solicitor’s letter and the grant or its foreign equivalent answer that.
Selling what you inherited
An inherited asset abroad, a flat or shares, carries the UK’s Capital Gains Tax rules if you are UK resident and later sell it. Our inherited property page covers the rule that the value at death is your starting point, so only the rise since then is taxed, and the 18% and 24% rates.
The foreign country may tax the sale too, and income tax double taxation agreements are separate from the inheritance tax ones. That is the point at which an accountant who deals with the other country earns the fee.
Pension Credit and other benefits
For a means-tested benefit the money is savings from the day it lands. GOV.UK says £10,000 or less in savings and investments does not affect Pension Credit, that every £500 over £10,000 counts as £1 a week of income, and to contact the Pension Service helpline if your circumstances change (GOV.UK, Pension Credit, checked 1 November 2026).
Housing Benefit and Council Tax Reduction at pension age use the same disregard with a £16,000 upper limit, set out with its source on our Housing Benefit savings page. Giving the money away to stay under a limit is treated as still yours, on the deprivation of assets page. Our Inheritance Tax hub covers the UK thresholds for the estate you will leave.