Will you pay tax on an inheritance?

If you receive an inheritance you'll be pleased to know that there's no income or capital gains tax on the actual receipt. So whether the inheritance is from the UK or a relative overseas you can receive it free of UK income and capital gains tax. The only tax you'll need to consider is UK inheritance tax. Inheritance tax is based on the position of the deceased person -- not you. The key issues will usually be their domicile status and the location of their estate. If they are non UK domiciled they'll only be charged to inheritance tax on their UK assets. By contrast if they're UK domiciled they'll be charged on their worldwide estate. So if you receive an overseas asset as an inheritance from a non UK domiciled relative there will be no UK tax and you can receive it totally tax free. If you receive a bequest from a UK domiciliary (or any UK bequest) you'll need to consider the UK inheritance tax position. The general rule is that anything that is left via the will (or under the intestacy rules) and which is charged to inheritance tax would fall on the personal representatives. This means that the executors or administrators would have the primary liability to settle any inheritance tax. If the receipt was gifted during the deceased persons lifetime it would be classed as within the deceased persons estate if he or she died within 7 years of making the gift. In this case the liability for inheritance tax would fall on the receipient of the gift. In all cases though the value of the estate would need to be compared with the available nil rate band. Only the excess of any estate above the nil rate band would be subject to inheritance tax.