My unmarried brother in Britain left me £51,000 in his will. I am a retired single man, living in Dublin with a public service pension. What are my tax liabilities on this inheritance?
Also, will it be the Irish tax authorities or the British ones that will be dealing with this matter?
HR
Inheritance from family in the UK is very common for people in Ireland. It is hardly surprising as so many Irish people emigrated to Britain in the postwar era and, unlike emigrants in more recent times, never returned.
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It is clearly touching for the beneficiary when a UK-based relative remembers family and makes provision for them in their will but it can also be confusing as the rules on taxation of inheritances are so different in the UK and in Ireland.
Changes in the UK inheritance tax rules can add to the confusion, although, to the best of my knowledge, they have not changed the position of Irish-based beneficiaries from UK estates.
In Ireland, we are used to the system where the beneficiary of an inheritance is assessed for tax on that sum. If it is below a certain threshold – and thresholds vary according to the relationship between the two parties – no tax is due. Above that threshold, you pay 33 per cent tax.
And the thresholds – to which we will return – are lifelong, or at least date back to all inheritances and gifts in excess of €3,000 taken since December 5th, 1991, close to 35 years ago.
In the UK, it is the estate of the dead person that is assessed for tax, not the beneficiaries. And if tax is owing, it is paid by the estate before assets are distributed to beneficiaries.
As of now – and, according to the UK, at least until the end of the UK’s 2029/30 tax year – any estate valued at less than £325,000 (€371,940) pays inheritance tax at 0 per cent.
If they leave their family home to a child or grandchild, that “nil-rate band” widens by a further £175,000 to £500,000 – although this line blurs if the overall estate is worth more than £2 million.
Everything above these thresholds is subject to inheritance tax at 40 per cent, although that figure can come down to 36 per cent if the person leaves at least 10 per cent of the net estate for charity.
And it is not just the estate at the time that a person dies. Gifts given by that person to others in the previous seven years can also come into the reckoning. These are taxed on a sliding scale of between 8 per cent and 40 per cent, depending on when the gift was made.
To add to the confusion, whether any UK tax bill affects you personally depends on the nature of the inheritance and whether there are enough assets in different sections. You might think if tax was due, all beneficiaries would be taxed pro rata, but you’d be wrong.
So what does that all mean for you? Unsurprisingly, it depends on some of the many variables mentioned above.
You say your brother left you £51,000 – over €58,000 at current conversion rates – in his will.
If this was a specific bequest – ie he said “I want to leave my brother, HR, a sum of €51,000″, then that amount should come to you in full, with the tax that might be liable on it paid out of the residue of his estate, assuming his state was worth more than £325,000 in the first place.
A residue is what is left in an estate after all the specific bequests and legacies have been dealt with. Most wills will have a residue clause that reads something along the lines of any residue of the estate being divided equally between my siblings/children ... whatever.
If the £51,000 is just your share of a residue, it might be reduced by any tax due on the estate.
Let’s assume for now that this is a specific legacy. In that case, no tax will have been paid on it in the UK. But where do you stand with the Irish authorities?
The Revenue Commissioners have the right to tax any inheritance if either the disponer (your dead brother in this case) or the beneficiary is resident in the jurisdiction. As you are resident here, Revenue will have something to say about your good news.
Tax relief on inheritances in Ireland is broken into three categories, which are, broadly, parent to a child, close blood relation and others.
Inheritances from a sibling come into category B covering close blood relations and the tax-free threshold there is €40,000. That figure can change but has been at this level since October 2024.
As it is, your €58,000 benefit is going to be over that threshold – but by how much? We noted earlier how, in Ireland, you need to weigh your liability alongside any other inheritances of gifts in excess of €3,000 that you might have received since December 1991 from this or any other brother or sister, any aunt or uncle or any grandparent.
If there is no other benefit, then about €18,000 of this inheritance will be taxed at 33 per cent. If there were prior benefits, more of this inheritance – and possibly all of it – could be taxed at that rate.
Assuming tax is due only on the €18,000 above the €40,000 tax-free threshold, your tax bill will be €6,000.
That money is due to the Irish authorities. You can make an inheritance tax return on form IT38, which is available on Revenue’s online MyAccount and ROS services or by using a paper form IT38 which you can find here.
If you receive your inheritance between January 1st and August 31st of a given year, the tax is due for payment by October 31st of the same year. If it comes after August 31st, you must pay any tax due by October 31st of the following year. Miss those deadlines and you could face a bill for interest on the amount due.
Now, if the £51,000 was your share of the residue and the estate had been worth more than £325,000, then the actual sum you get could be less as the residue pays inheritance tax not only on its contents but on the grossed-up value of any specific legacies.
In that case – which, to be fair, I do not think applies here – the Irish tax authorities would give you a credit against your Irish tax bill for any tax already deducted in the UK before you get your inheritance. This is provided for in the tax treaty between Ireland and the UK to avoid double taxation.
That tax credit maxes out at your Irish tax liability. So, for instance, if the UK tax authorities took €8,000 of your inheritance to cover taxes due on your brother’s estate, you would pay none of the €6,000 due to the Revenue but you would not get a refund of the extra €2,000.
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To further complicate matters, if there were not enough money in the residue of your brother’s estate to pay any tax due, your pecuniary legacy (cash inheritance) could be reduced to meet any tax due.
In fairness, this sounds like a specific legacy so my view is that you should have no tax liability in the UK and a bill of €6,000 due to the Irish Revenue.
You don’t have to worry about the British taxman either way. If any tax was due on your brother’s estate, it was the responsibility of his executors to sort that out before sending you your inheritance.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to [email protected] with a contact phone number. This column is a reader service and is not intended to replace professional advice
