Inheritance Tax Worldwide – How Does the UK Compare?
When it comes to passing on wealth, the UK is far from alone in charging tax. Many countries operate inheritance or estate taxes, but the way they’re applied, the thresholds involved, and the rates charged can vary significantly.
So how does the UK system stack up, and what should you be aware of if you or your family have international ties, whether through assets or heirs overseas? How is inheritance tax worldwide?
The UK: An Estate-Based Approach with a Global Top Rate
In the UK, Inheritance Tax (IHT) is applied to the estate of someone who has died, rather than to the beneficiaries. The current rules are:
- A standard 40% rate on the value of the estate above the nil-rate band of £325,000, plus an additional residence nil-rate band of £175,000 in certain cases.
- Reliefs such as Business Property Relief and Agricultural Property Relief may apply, reducing or eliminating tax on qualifying assets.
Although inheritance tax is regularly debated politically, it continues to generate significant revenue and looks set to remain a key feature of the UK tax system for the foreseeable future.
Inheritance Tax Worldwide
- Estate-Based Taxation (Similar to the UK)
Some countries, including the United States and South Africa, also levy tax on the deceased’s estate before it is distributed:
- In the US, generous exemptions mean that only very large estates pay federal estate tax.
- South Africa applies a tiered rate structure, with estate duty between 20% and 25%.
- Beneficiary-Based Taxation
In contrast, many European countries — including France, Germany, Ireland, the Netherlands, and Belgium — tax the individuals receiving the inheritance:
- Each beneficiary has their own tax-free allowance, which is usually more generous for close family members and far lower for distant relatives.
- Inheritance tax rates can be steep, ranging up to 45–60%, though these typically apply only to large inheritances or distant heirs.
- No Inheritance Tax
Some countries have done away with inheritance or estate taxes altogether. These include Australia, New Zealand, Canada, Norway, Portugal, Singapore, and Hong Kong.
However, this doesn’t always mean tax-free succession — other taxes, such as capital gains at death or stamp duties, may still apply, and the overall tax burden can still be significant.
Where the UK Stands Out
The UK differs from many countries in a few key ways:
- The 40% rate is one of the highest globally.
- Unlike some jurisdictions, the UK’s allowances do not scale with the relationship between the deceased and the beneficiary.
- Around a third of developed countries have now abolished inheritance taxes altogether, though many still tax wealth transfers through other means.
Implications for International Families
If you or your family have overseas connections — whether through property, investments, or beneficiaries — it’s important to consider:
- Double taxation risks, where both the UK and another country may apply inheritance or estate tax.
- Countries without IHT may still levy capital gains tax or other duties on death.
- Cross-border estate planning is essential, especially in relation to residency, domicile, and the location of assets.
In Summary
While the UK isn’t alone in taxing inheritances, its system is among the more costly and complex worldwide. For internationally mobile families, early and informed planning can significantly reduce the tax burden and help ensure assets are passed on efficiently and in line with your wishes.
If after this explanation of inheritance tax worldwide you’re still unsure how your estate or overseas assets and heirs may be affected, our expert tax team can help you navigate the options and put the right protections in place.
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