If you live abroad or have assets outside of the UK, it’s likely that your heirs, or even you, will be affected by the inheritance taxes of more than one country.

Most UK nationals living abroad remain liable for UK inheritance tax on their worldwide assets because they are still seen as a UK domicile, often without realising it.

To make sure your legacy goes to the right place without leaving your heirs a hefty tax bill, you’ll need to understand the rules in the UK and your country of residence and how they interact.

Taxes on gifts

Many countries charge a tax on gifts given within your lifetime, although there may be some exemptions or time-based relief. In the UK, for example, if you survive for at least seven years from the date of a gift to an individual, it may fall out of account for tax purposes.

Different types of taxes on death

France imposes a ‘succession tax’ on residents’ worldwide assets. The tax is paid at a progressive rate by each beneficiary. Rates vary according to their relationship to you and can be very high for ‘non-relatives’:

  • Spouses and civil partners are exempt from succession tax
  • Rates range from 5% to 45% for natural children
  • Stepchildren and unmarried partners face the non-relatives rate of 60%

charges succession and gift tax on Spanish assets or assets passing to Spanish residents. State rates range from 7.65% - 34% but surcharges could increase this to 82% for wealthy recipients not directly related to you. In addition, each ‘Autonomous Region’ applies different reliefs and exemptions, and often different rates of tax.

and Malta charge a ‘stamp duty’ instead of inheritance tax:

  • In Portugal, stamp duty is fixed at 10% and only applies to Portuguese assets
  • In Malta, tax is only charged when an indirect relative inherits property

There are no taxes on inheritances or gifts in Cyprus, Gibraltar or Monaco.

Allowances and exemptions

Tax-free allowances can vary greatly depending on your relationship with the heir. It’s often more punitive for less ‘traditional’ families, such as unmarried couples or those with stepchildren:

  • France offers a 100% tax-free allowance for spouses, €100,000 per parent for natural or adopted children but only €1,594 for stepchildren
  • In some Spanish regions, spouses and children can receive a 99%+ allowance, while others won’t offer any exemptions or recognise civil partnerships
  • In Portugal, married spouses and direct line ascendants/descendants won’t pay any stamp duty at all

How we can help with inheritance tax advice

Blevins Franks is highly specialised at advising expatriates on how to legitimately avoid or limit inheritance tax in the UK and your country of residence. We also provide a domicile determination service to establish whether you are still liable to UK inheritance tax.