UK Property – What the Agents Don’t Tell You
There has been little good news coming out of the UK recently, particularly for non-resident buyers of UK property. Leaving aside the non-dom regime, the primary concern remains inheritance tax (IHT), which continues to be the biggest issue facing overseas buyers. IHT is levied at 40% upon death, and in recent years, non-resident buyers have increasingly found themselves paying this tax due to poor planning, lack of awareness—or both. Gone are the days when offshore companies and trust structures could shield you from this burden.
Historically, overseas buyers used offshore structures to reduce IHT exposure, maintain privacy, and ensure efficient succession of assets to family members. However, following revelations from the Panama, Paradise, and Pandora Papers, the UK government amended legislation affecting such structures. In 2017, His Majesty’s Revenue & Customs (HMRC) rendered these strategies ineffective against IHT, alongside a raft of new legislation targeting overseas owners. HMRC now has direct visibility into the beneficial ownership of UK assets and imposes a 40% tax on death, irrespective of nationality, passport, residency, or holding structure.
Like tax authorities worldwide, HMRC openly exchanges information for tax collection purposes and mandates disclosure from professionals such as trustees, bankers, and lawyers. Since 2017, IHT receipts have increased by over 20% year on year—highlighting the urgent need for proper planning. For overseas buyers, the current options to protect UK assets are essentially:
Sell – Dispose of the asset, survive two years, and eliminate IHT exposure. Not always appealing, especially since trophy assets are often valued as intergenerational stores of wealth.
Gift – Transfer the property to a family member and survive seven years. The original owner can no longer benefit from the asset, and the recipient gains full control, including the right to sell.
Insure – Implement an insurance policy that covers the IHT liability when—not if—it arises. This option preserves control, ensures liquidity at the right time, is cost-effective, and enables a smooth transfer of property to family members.
It’s important to understand that when a property owner dies, the asset comes under HMRC’s control. The IHT must be settled in cash within six months before the property can be sold or transferred. Failure to do so can lead to a forced sale or even confiscation of the asset.
Insuring against this inevitable tax is the most reliable way to maintain control and ensure liquidity is available when it matters most. Yet it’s often overlooked by trustees and lawyers, whose limited knowledge of international insurance solutions ultimately disadvantages the property owner. Insurance provides cash at a critical time—and allows the financial burden to be transferred to an insurer for a fraction of the tax cost. Furthermore, if the property is sold later, the policy can be surrendered and premiums may be refunded—meaning the solution could cost you nothing in the long run.
Debt doesn’t die with the borrower. That’s why insurance to cover mortgages and other liabilities is crucial for ensuring assets pass cleanly to family members as intended. Assigning a debt provision policy to your lender also increases their comfort, often eliminating the need for additional collateral or personal guarantees, and can secure more favorable terms.
UK property—especially in London—remains attractive, but it’s full of fiscal pitfalls for uninformed overseas buyers. Among all applicable taxes, IHT poses the greatest threat. Agents often downplay it to avoid discouraging buyers. But building a property portfolio anywhere is challenging enough—protecting your assets for intergenerational wealth transfer is essential. Don’t let 40% of your estate go to the UK government when it can be avoided. Most importantly: seek advice now, because the best time to buy insurance was yesterday!
Tim Searle TEP
Tim has been offshore for nearly 30 years and resides in Dubai. He is a full member of the Society of Trust and Estate Practitioners (STEP) and is CII-qualified (Chartered Insurance Institute of London). A frequent conference speaker, radio guest, and contributor to publications, Tim sold his former company, Globaleye, to a FTSE-listed PLC. He now offers bespoke advisory services to HNW clients globally. He is married with four children and is a former Naval Officer.
Email: tsearle@hnwtax.com
Phone: 050 6466178
