How does inheritance tax work if both adult children live abroad?

[Whitesky75]

do they still pay inheritance tax in the UK? Their parents lived and worked in the UK and the house is in London. Parents migrated to the US few years ago to live near their adult children and have now both passed away.

The estate is taxed based on the parents tax domicile, not the children’s.

The UK estate pays the tax not the children.

If they are adult children the inheritance tax rules depend on the country they pay tax in (has nothing to do where the house is or where the parents lived )

Not correct

It can be complex and will depend on the tax residency of the deceased (this is not always the same as where they are presently physically located), and the terms of the will.

In most circumstances the estate will pay the tax, but you and they need to take professional tax advice. This isn't something anyone can answer for sure without more detail.

https://www.gov.uk/inheritance-tax/when-someone-living-outside-the-uk-dies#:~:text=the%20UK%20dies-,When%20someone%20living%20outside%20the%20UK%20dies,you%20have%20in%20the%20UK.

This is a very simple overview but please, seek professional tax advice.

I got an inheritance from another country - my tax advisor was clear the tax I paid is related to my overall income for the year (UK)

agreed best to discuss with a tax advisor or accountant specialising in tax

IHT is payable by the estate. What assets fall into the estate are based on your parents' domicile- "their true home, or vital centre of personal and economic interests". If they are considered UK domiciled, then the estate will include their worldwide assets. If they were non-UK domiciled, it would only include UK situs assets.

You mention they moved to the US, but did they effectively cut ties with the UK (other than the house)? If they moved the majority of their economic interests overseas, you could argue they adopted a domicile of choice in the US. Domicile is sticky and can be very hard to lose.

Domicile can be a grey area and HMRC have been getting more aggressive with challenges recently. It would be a good investment to sit down with a chartered tax advisor specialising in IHT to go through the exact facts (ironically I am one, but would recommend getting a recommendation if you can).

If the property is situated in London then IT is payable regardless of the residence/domicile of the deceased.

The estate is taxed in the UK, so if other assets were situated outside UK the IT charge will depend on the domicile/residency status of the deceased.

It is important to note that if the children are US citizens they may also have a State IT and Federal Estate Taxes to pay. But there is a Double Tax Treaty between US and UK so in the end the maximum that would be charged in either jurisdiction will be the actual payment.