Inheritance in the UK – Succession of property held by Japanese nationals in the UK
Is a will made in a foreign country valid in the UK?
Pursuant to the provisions of the Wills Act 1963, a will made abroad may be deemed valid in England and Wales.
As a general rule, you should apply for an English Grant of Probate in respect of a will in order to confirm its validity. This article describes the probate process for wills.
Inheritance tax on UK assets
If you are Japanese and resident in the UK, you will be required to pay inheritance tax on assets you own worldwide.
If you are a non-UK resident, you will pay inheritance tax only on UK assets, but you may also be taxed on property from the country in which you reside.
The standard inheritance tax rate in the United Kingdom is 40%.
There is no compulsory inheritance in England and Wales, and a person may leave his or her property to any person of his or her choice by making a will in England.
If the decedent is a resident of the United Kingdom and dies without leaving a will, the Probate Act governs how the decedent’s property should be distributed and how inheritance tax in the United Kingdom should be paid.
Probate Rules in England and Wales
● Spouse, legally authorized partner, and children: the spouse or partner receives the first 270,000 pounds, called the legal legacy, from the estate and the decedent’s personal property, regardless of its value. The spouse or partner also succeeds to the other half, and the remainder is divided equally among the children. Property inherited by children of untaxed age is kept until they reach the age of 18. If a child is deceased, his or her share of the inheritance passes to the grandchildren. If a husband and wife or couple are separated but not legally divorced at the time of death, the spouse or legally recognized partner will still inherit.
● If there is a surviving spouse but no children: in this case, the spouse or partner receives the first 270,000 pounds and the remainder is split 50/50 between the spouse/partner and the surviving parent. If there are no surviving parents, the inheritance will pass to the decedent’s siblings (or nieces/nephews). In the absence of these heirs, the spouse/partner inherits the entire estate.
● If there is no surviving spouse or legally succeeding partner: The entire estate is distributed to the children or grandchildren. If there are no children or grandchildren, the estate passes in the following order: parents, siblings (nephews/nieces if deceased), half-siblings (children if deceased), grandparents, uncles/aunts (cousins if deceased), half-siblings and half-sisters of parents (children if deceased).
Inheritance tax rates
In the United Kingdom, inheritance tax is levied on the estate of a resident of the United Kingdom and on property held in the United Kingdom by an overseas resident. Estates include (but are not limited to) real estate, cash, investments, and other possessions. In addition to the net value of the estate, UK inheritance tax is imposed on bequests made during the seven years prior to the decedent’s death.
Inheritance tax is paid by the administrator of the estate if there is no will, or by the executor if there is a will. Thus, the heirs do not pay the UK inheritance tax themselves. However, if they make a profit from the sale of inherited property, they may be subject to other taxes such as income tax and transfer tax.
Gift Tax in the UK
Gifts made during the seven years preceding the decedent’s death are subject to UK inheritance tax, but the tax rate may be reduced if the gift was made three to seven years before death and is over £325,000.
A gift can be made to any estate and is also a gift if the transfer of the property results in a loss of value to the estate. For example, if a decedent sells property to a child for less than its actual value, the difference in value is a gift.
The UK estate tax rate is 40% of the full value of the property for gifts made within 3 years of death. Gifts made within 4-7 years of the decedent’s death are subject to gift tax. The gift tax rates are outlined below.
Less than 3 years: 40%.
Three to four years: 32%.
4-5 years: 24%.
5-6 years: 16%.
Six to seven years: 8%.
More than 7 years: 0
Unilateral Tax Credit
Japan does not have a double taxation agreement with the UK. If the transfer of property is subject to inheritance tax as well as similar taxes in other countries with which the UK does not have an agreement, you may be entitled to a tax reduction under unilateral relief provisions (Unilateral Relief provisions) in respect of property outside the UK.
HMRC provides a credit against inheritance tax for taxes levied by a country on property inherited in that country.
Under general international law, real estate and other movable assets are subject to the inheritance tax regime of the country in which they are located at the time of the owner’s death.
Payment of Gift and Inheritance Tax in the United Kingdom
Under HMRC rules, inheritance tax must be paid by the executor within six months of the decedent’s death. If this deadline is missed, HMRC will charge interest.
To pay inheritance tax, you will need a payment arrangement number. With a Payment Arrangement Number, you can pay the tax from your own bank account or from a joint bank account held jointly with the decedent.
Procedure for valuing an estate in the UK: Probate
When a resident of the United Kingdom dies, his or her heirs must apply for legal rights to deal with the estate. This process is called applying for probate. If the decedent left a will, a grant of probate is granted. If there is no will, the heirs will receive a letter of administration. In most cases, the application can be filed online. If necessary, documents such as a will, any supplemental will, birth certificate, death certificate, marriage certificate, and partnership certificate must be submitted.
If probate is not required:.
● If the decedent had jointly owned land, property, stock, or cash: it will automatically transfer to the surviving owner.
● If the decedent had only savings or bonds with premiums.
It is important to contact the owner of each asset, such as a bank or mortgage company, to determine if a probate is required in order to inherit the property. This is because each organizational entity may have different rules.
When applying for a Probate, you will be asked to submit the appraised value of the property. There are two aspects to this.
1. contact the banks, utilities, and other institutions where the decedent had accounts and ask them to provide an official opinion of the estate.
2.It is also important to value other possessions the decedent owned prior to death, such as homes, jewelry, and accounts payable. Debts must also be calculated. This will allow you to calculate the UK inheritance tax applicable to the estate.
Although it is not necessary to hire an accountant to value the estate (as we can submit these directly to HMRC ourselves), it is advisable to hire an expert when different types of property are involved, especially if some are located overseas. Therefore, if the decedent is a Japanese national residing in Japan or a Japanese national residing in the UK, you will need to check with a specialist to ensure that the probate application is smooth.
The valuation of real estate may take 6 to 9 months, and in the case of large properties, the time period may be even longer. Therefore, Japanese nationals who reside overseas or in the UK and have assets in the UK can organize their property at the time of making a will to ensure a smooth succession of their estate to their heirs.
Kuribayashi Sogo Law Office is a law firm specializing in cross-border law and provides comprehensive legal advice to all those who are troubled by international inheritance issues. For more information, please contact our office.
Introduction of columns on inheritance procedures from around the world
We would like to introduce you to columns we have written on inheritance procedures in countries around the world in addition to the United Kingdom. Please click on the titles of the columns below to read more about estate planning procedures in each country.
- ・Probate Procedure in New York State
- ・Inheritance in California
- ・Inheritance in Hawaii
- ・Inheritance in Switzerland
- ・Probate Procedure in Hong Kong
- ・Probate procedure in Singapore
- ・Inheritance of Korean Nationals in Japan
Services we can provide
We can assist you in all aspects of international inheritance procedures in cooperation with local attorneys, including preparation of legal opinions (affidavits) regarding the scope of heirs, etc., collection and English translation of necessary documents such as family registers, etc., and authentication procedures at embassies and the Ministry of Foreign Affairs.
If you have any questions about international inheritance, please feel free to call us at 03-5357-1750officehours:9:00-18:00Japan time zone)orcontact us via e-mail form(“https://kslaw.jp/contact/”).