UK inheritance headache: am I taxed here or there?

If I receive inheritance money from England am I liable to pay tax in Ireland?

Mr PK, email

It depends. Doesn’t it always? In this case, it depends on how much you are inheriting and from whom.

The situation with cross-border inheritances can be complicated by the fact that there are different taxation regimes in different countries. And so it is here.

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In the UK, it is the estate that is taxed; in Ireland, tax is a matter for the recipient.

For you, the key is that you are in Ireland, resident here for tax and so it is the Irish regime that applies.

That means you can receive between €16,250 and €335,000 free of tax, depending on your relationship to the person leaving you the money. If it was a parent, you’re at the upper end; if they were a grandparent, uncle, aunt or sibling, then the tax-free limit is €32,500 and, for anyone else, it is the€16,250 figure.

To complicate matters, you also need to take into account previous inheritances or large gifts (anything above €3,000) that you might have received in whichever of the three categories is relevant here.

So, if you previously inherited €10,000 from an uncle and €20,000 from a sibling, and you are now inheriting from another uncle, you only have €2,500 left of your tax free amount before you start paying tax.

Once tax is due, it will be charged at 33 per cent.

But what if the money has already been taxed in the UK as part of the uncle’s estate?

That’s okay. You are still liable for tax here but there is a double taxation agreement between Ireland and the UK to make sure you do not pay tax twice on the same sum.

If the money has been taxed in the UK, that sum will be set against your tax bill here. So, if you received one-tenth of your uncle’s estate, a tenth of the UK tax bill will be set against your tax bill in Ireland.

You will then pay whatever balance is outstanding on the tax bill. If the UK tax exceeds what you are due to pay here, you will pay no tax but you do not get back the “lost” excess inheritance that was paid in tax in the UK.

– Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.