Gifts from Non-Resident Parents
Receiving gifts or assets from parents who are not UK residents is a common scenario, especially in today’s interconnected world. While such gifts can be a source of financial support or a way to pass on family wealth, it’s essential to understand the potential inheritance tax consequences.
Inheritance Tax Basics
Inheritance tax (IHT) is a tax levied on the estate of a deceased person. It can also apply to certain gifts made during an individual’s lifetime. The current IHT threshold in the UK is £325,000, known as the “nil-rate band.” Any value of your estate exceeding this threshold is subject to a 40% tax rate.
Gifts from Non-Resident Parents and IHT
If you receive gifts or assets from non-resident parents, whether in the form of cash, property, or other valuables, their tax status and the location of the assets can affect whether IHT applies.
Here are some key considerations:2
- Domicile: Inheritance tax is often influenced by an individual’s domicile, which is their permanent legal residence. If your parents are non-UK domiciled (they consider another country their permanent home), this can impact the IHT liability on their worldwide assets.
- Exemptions and Reliefs: Some gifts from non-resident parents may be exempt or eligible for relief from IHT, depending on factors such as the type and value of the gift, the duration of your parent’s UK residence, and any applicable double taxation agreements.
- Spouse or Civil Partner Exemption: Gifts between spouses or civil partners, regardless of their domicile status, are generally exempt from IHT.
Receiving gifts or assets from non-resident parents can be a significant financial event. Being aware of the inheritance tax implications and seeking professional advice is essential to manage your tax responsibilities effectively.
If your parent is non domiciled and not deemed domiciled in the UK, you will be looking at any potential inheritance tax issues if the cash gift came from a UK bank account/UK fund. If this is the case, then this would be a potentially exempt transfer.
If this was gifted from an overseas bank account, then this would be treated as excluded property for UK inheritance tax purposes. This means that this would be outside the scope of UK inheritance tax.