Inheritance Tax
UK residential property is always within UK Inheritance Tax at 40% above the nil-rate band — even for non-residents, and even if held via an offshore company.
Who it applies to
Every owner of UK residential property, regardless of residence or domicile. From 6 April 2025, worldwide assets can also be in scope for 'long-term UK residents' (UK-resident 10 of the last 20 years).
How it affects your return
IHT is charged at 40% on the value above the £325,000 nil-rate band (a £175,000 residence nil-rate band may apply if a home passes to direct descendants, tapered away above a £2m estate). UK property is a UK-situs asset that cannot be sheltered by holding it in an offshore company, so overseas investors should plan for a potential 40% charge on death.
| Component | Amount |
|---|---|
| UK property / estate value | £600,000 |
| Nil-rate band | −£325,000 |
| Taxable estate | £275,000 |
| IHT at 40% | £110,000 |
Example: a £600,000 UK property with no other UK assets and no residence nil-rate band (investment property). IHT is due before probate.
- Assuming non-residents escape UK IHT — UK real estate is always in scope.
- Believing an offshore company shelters a UK home from IHT — it no longer does.
- Not planning for the liquidity to pay IHT (it is due before probate).
- Estimate exposure: (UK estate − available nil-rate bands) × 40%.
- Consider life cover written in trust to fund the liability.
- Review ownership and wills with a cross-border estate specialist.