Inheritance Tax: Double Taxation Relief
Source: gov.uk (2025-04-05)

If both the UK and another country charge Inheritance Tax, you could avoid or reclaim the tax through a double taxation convention.

Double taxation conventions

Double taxation conventions are treaties (agreements) which help prevent you being taxed in the UK and another country. This can happen if a person was domiciled or deemed domiciled (fiscally domiciled) in another country when they die.

You might be able to reclaim the tax through a double taxation convention, if the other country charges Inheritance Tax on the same property or gift the UK is taxing.

The UK has a number of bilateral double tax conventions for taxes on estates, gifts and inheritances.

How double taxation conventions work

For the purpose of the agreement, they allow:
- the country in which the transferor is (or in the case of a death, was) domiciled or deemed domiciled to tax all property wherever it is
- the other country to tax only specified types of property, such as immovable property, in its territory
From 6 April 2025, a person is treated as having deemed UK domicile if they are a long-term UK resident.

If you still suffer double taxation, there are rules for deciding which country gives credit for the other’s tax.

Countries the UK has double taxation conventions with

The following double taxation conventions apply to Inheritance Tax.

Treaties with France, Italy, India and Pakistan were in place before 1975 during the Estate Duty era and have different rules to eliminate double taxation. They do not include provision for deemed domicile.

If there is no double taxation convention

If a transfer is liable to Inheritance Tax and also to a similar tax imposed by another country with which the UK does not have an agreement, you may be able to get relief under Unilateral Relief provisions.

Unilateral Relief

HMRC gives credit against Inheritance Tax for the tax charged by another country on assets sited in that country. For this purpose, UK law determines the location of the asset. If the tax that is charged on the asset by the other country exceeds Inheritance Tax on that asset, your credit is limited to the amount of Inheritance Tax.

You can also get a credit where both the UK and another country impose tax on assets that are sited:

in a third country

both in the UK under UK law and in the other country under that country’s law

In these cases the credit is a proportion of the tax. The proportionate credit is computed by the formula: A ÷ (A + B) x C

A is the Inheritance Tax, B is the overseas tax and C is whichever of A or B is smaller. If the UK and two or more other countries tax the same asset the above applies but with modifications.

Double Taxation Relief

Double Taxation Relief is given in accordance with the terms of the relevant double taxation convention. If you have paid tax in an overseas country and the relief is due, they will give you a credit for the tax paid overseas against the Inheritance Tax due in the UK on the same assets on which the overseas tax was paid. The relief will be limited to the actual amount of overseas tax paid on those assets.

Example

You die on 6 May 2024 and leave an estate of £500,000. Your estate included an apartment in America valued at £35,000 on which American tax of £1,500 was paid.

Calculation of Double Taxation Relief

Work out the Inheritance Tax due on your estate.

Estate = £500,000 Less threshold = £325,000 Total = £175,000 Inheritance Tax due @ 40% = £70,000

Calculate the proportion of the Inheritance Tax that is attributable to the American apartment using the formula.

Value of asset ÷ total value of the estate x IHT = 35,000 ÷ 500,000 x 70,000 = £4,900 Inheritance Tax on the American apartment.

The American tax actually paid was £1,500, so the relief is limited to the £1,500 actually paid.

Further information

For more information about Unilateral Relief and Double Taxation Conventions read the Inheritance Tax Manual Foreign property: Double Taxation Conventions (https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm27161) guidance.