Our team of experts provide advice and offer insights for cross-border estate planning including the interaction of UK Inheritance Tax (IHT) with Australian capital gains tax (CGT) on estates.
If your assets in the United Kingdom (UK) are above £325,000, your estate is likely to be required to pay UK IHT at 40% of the value of those assets when you pass away. If you are originally from the UK, you may also find that UK IHT is payable at 40% on your worldwide estate.
The UK Government has announced that from 6 April 2025, if you pass away, you will be liable to UK IHT if you have been a UK tax resident for a ten year period. The exact wording of the new UK IHT legislation is yet to be published. Seeking professional advice before these changes occur can help you reduce and address any challenges that may arise. We provide legal guidance to minimise your exposure to UK IHT.
The interaction of the UK and Australian tax position on death is complex, with the potential for challenges to arise across Australian and UK CGT laws and from UK’s IHT laws. With appropriate planning, these challenges can be avoided. In certain occurrences, the combined effect of UK IHT on death and Australian CGT on the distribution or sale of an asset from a deceased estate may result in an effective tax rate of 85% (that is, 40% UK IHT and 45% Australian CGT).
The UK and Australian double tax treaty does not grant a credit for the UK IHT against the Australian tax on Capital Gains.
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