Inheritance from abroad tax implications

[Anonuser21]

Hi all

A relative is going to receive some inheritance in the region of £150k from abroad (India). They are a British citizen living in the U.K. and pays all their taxes in U.K.

Anyone know what kind of tax implications they’ll have to pay when the funds are transferred to the U.K.

or

can anyone advise who they should consult that deals specifically with these kind of matters?

Any advice would be kindly appreciated.

Thanks in advance.

@Anonuser21 The attached might be useful. Your relative could set up an account in India and transfer the money to an account here following the rules outlined here. Or the executor could do it direct I think.

Taxes are normally paid by the deceased on their estate here (IHT) but not sure if that happens in India. I don’t think there’s tax to pay here until any interest is earned but that depends on tax status of your relative. What they might need to consider is bank charges for the transfer and exchange rate. Some banks charge a lot for such transfers so shop around.

Any money you receive in the UK from a foreign inheritance is not subject to tax. However, if you put it in a savings account and earn interest then you will, obviously, have to pay tax on the interest you earn.

If you were left property or land instead of cash then, again, there is no inheritance tax to pay but, if you later sell the property for more than it was worth when you inherited it then it is likely that you will have to pay capital gains tax on the increase in value.

Hi and thanks for reply.

I tried to research this online but the information was inconsistent and I didn’t really understand it.

For peace of mind do you know where to find the source to this “Any money you receive in the UK from a foreign inheritance is not subject to tax”.

Inheritance tax is pad by the estate of the deceased. Not a recipient so we have no mechanism for collecting it here if the deceased didn’t die here. That’s how it works. Your relative is just receiving money,

This is from a gov.uk website

https://community.hmrc.gov.uk/customerforums/pt/85bbe55b-970a-ed11-b5cf-00155d973ade

This is also a good explanation. As long as the deceased person did not live in the UK then there is no tax to pay:-

https://www.nrilegalservices.com/before-you-plan-to-take-away-inheritance-money-from-india/

Thanks for the reply, it's been very beneficial.

I am now informed the deceased person was a British citizen living in the U.K. at the time of his death in March 2019.

Having clicked on the website @Another2Cats it states
'Transfer of inheritance money to the UK

The United Kingdom is currently the only country with which India has an agreement (contract) specifically on inheritance tax.According to this contract, whether you must pay the UK inheritance tax depends on where the deceased was domiciled at the event of death. In the simplest, your domicile is the country that you consider as your permanent home.You only have to pay the UK inheritance tax if the deceased was domiciled in the UK at the time of death. This is currently set at 40%, but there are several exemptions and deductions you can make'

As the deceased person was domiciled in the U.K. at the time of his death would this mean if any of the funds are transferred to the U.K. they would be liable to pay 40% inheritance tax????

It doesn't mention what exemptions/deductions are?

was the £150k the only amount that was in the estate?

That is below the threshold for IHT in England

@Anonuser21 Was the person considering this country their home? You didn’t say this originally. If they live here it appears IHT rules apply here.

Secondly, what is the total value of the estate? Is the £150,000 all of it or a portion of it? Look at the thresholds for paying the tax.

Apologies, this is for a relative and not myself. I’m going on based on information they provided.

Yes the deceased person was considering U.K. their home.

Total value of estate is in region of £1.25 million of which has been distributed amongst several people.

How would the foreign inheritance tax be calculated in this case?

Would an accountant be the best point of contact?

thanks

OK, this makes things a lot simpler. If they were living in the UK at the time of their death then the executors of their will are required to pay any inheritance tax due before anything can be distributed from the estate.

For a person living in the UK who dies, any assets overseas are also included in their estate and are subject to inheritance tax. Sometimes, people think that foreign assets aren't included - but they are.

It is a legal requirement for the executors to pay any inheritance tax before assets are distributed. If you are in any way unsure whether this has been done (and specifically for any overseas assets) then just have a quick word with the executors.

If they distribute any assets without ensuring that inheritance tax has been paid then they are liable personally - rather than the beneficiary that receives the inheritance.

So you don't need to worry about an accountant or lawyer, just ask the executors if they have paid the inheritance tax and included the Indian assets when they notified HMRC.

The responsibilities of executors and beneficiaries are not the same in every country, nor are the laws around inheritance (England & Wales is unusually liberal).

You want advice from someone who understands the law and tax requirements both in England & Wales (or Scotland) and the matching requirements in the second country. For Indian states I'd expect this to be a service available through UK based lawyers as its a common situation.

Thanks for all the help everyone , really appreciated.